A lot of people do not know this, but tokenization has been around for some time now.
In the beginning, tokenization was used in ensuring the security of credit card information, which was made possible by simply converting personal data into strings of characters, but most recently, the term tokenization became famous for mainly being used in blockchain technology.
As a lot of people are trying to know more about blockchain, NFTs, and cryptocurrencies, the need to know more about tokenization and what its different types are is increasing in an exponential way.
So, if you’re one of the many that’s trying to know more about tokenization, and the different types of tokenization, all you have to do is read this article!
What Is Tokenization?
Before talking about anything else, we have to talk about what tokenization is.
Basically, tokenization is the process of replacing sensitive data with unique symbols that would contain all the important information about the certain data without having to compromise security measures. Tokenization has also become a known way for small, medium sized and big organizations to ensure security of credit card, debit card, and other types of transactions while minimizing the cost of compliance with government set rules or regulations and the ongoing industry standards.
Lastly, tokenization can protect privacy by ensuring that only tokens are exposed or stored when a transaction is made, and thanks to how it can turn sensitive data into unrecognizable strings of characters that are unusable without a tokenization system, it serves no value to thieves that manage to steal them.
In short, tokenization is the process of breaking up a sequence of strings into a bunch of pieces, which include words, keywords, phrases, symbols and other elements that are known as tokens.
Where Is Tokenization Used?
Tokenization has a lot of uses, which includes benefiting organizations with all the sensitive data, however it is primarily used in the Payment Card Industry.
The process of tokenization is used primarily in the PCI because it offers protection for credit card information, social security numbers, information related to bank accounts, and other sensitive data that’s involved in the Payment Card Industry.
With the Payment Card Industry (PCI), tokenization is used over the process of encryption due to multiple reasons, which includes cost efficiency and because of how simple the process of tokenization is to implement.
Also, when compared to other data protection methods, tokenization is extremely efficient and safer along with the fact that it meets all the government compliance standards.
Two Types Of Tokenization
There are two types of tokenization, the vaulted tokenization and the vaultless tokenization.
The two are different and unique in their own ways, and in order to understand them, keep on reading.
What’s Vaulted Tokenization?
Vault tokenization is the older method of tokenization, where the tokenization process requires a database that’s queried with a token in order to get the original data that’s stored within it.
This means that a large database requires mapping tokens back to their clear data.
The term itself, vault, means that both sensitive data and token are going to be mapped and stored in a table, which is known as the Teradata Table. But the problem with them is handling the Teradata Table can become a challenge once the number of transactions increase.
In short, vaulted tokenization, which is also known as vault tokenization, involves maintaining a secure database, which is also known as the tokenization vault database, where sensitive data is stored. Other than that, the tokenization vault database also stores corresponding non-sensitive data for sensitive information. This allows users to decrypt tokenized data with the help of sensitive data tables and non-sensitive data tables.
What’s Vaultless Tokenization?
Vaultless tokenization is the much more efficient and safer alternative when compared to vault tokenization.
With this one, you are not required to maintain a database, instead, vaultless tokenization focuses on using secure cryptographic devices, which then leverage algorithms that are based on certain standards for the conversion of sensitive data into data that’s non-sensitive. The tokens that are made in vaultless tokenization are allowed to be decrypted in order to obtain the real data without having the need of a tokenization vault database.
In short, vaultless tokenization does not involve the use of a vault that would store the data or information. This one is much more safe and efficient when compared to vault tokenization as it does not maintain a database, instead, it uses secure cryptographic devices.
The term cryptographic devices refers to those devices that are using standard-based algorithms to convert highly-sensitive data or information into non-sensitive data for the creation of tokens.
Lastly, for detokenziation, these tokens are used to generate the original data or information without the need of a tokenization vault database.
Vault Vs Vaultless Tokenization
Here are some of the main differences that you need to know about vault tokenization and vaultless tokenization:
| Vault Tokenization | Vaultless Tokenization |
|---|---|
| With Vaulted Tokenization, a secure database is maintained, which is also known as the tokenization vault database, where all the important and sensitive data is placed. | The Vaultless Tokenization focuses on using secure cryptographic devices, which leverage algorithms that are based on certain standards for the conversion of sensitive data into data that’s non-sensitive. |
| The Tokenization Vault Database stores corresponding non-sensitive information/data for sensitive information/data. | The Vaultless Tokenization does not maintain a database, making it more safe and efficient when compared to vaulted tokenization. Instead, this one uses secure cryptographic devices. |
| The Vaulted Tokenization is used for the purpose of storing sensitive data, which includes credit card numbers, account numbers and corresponding token data. | Because it does not require a database, vaultless tokenization can be used in bank transactions, medical records, criminal records, vehicle driver information, loan applications, stock trading and even voter registration because they are safer and much more efficient to maintain. |
How Vaulted Tokenization Works?
With the vaulted tokenization, you are required to maintain a secure database, where all the sensitive data is going to be stored. The tokenization vault database is also responsible for storing corresponding non-sensitive data for the sensitive data or information, which allows users to decrypt tokenized data with the help of sensitive data tables and non-sensitive data tables.
How Vaultless Tokenization Works?
With the vaultless tokenization, it does not involve the usage of the tokenization vault database, where data or information is stored, instead, it uses secure cryptographic devices to generate tokens using standards-based algorithms and encryption keys, making it more efficient and safe because it does not maintain a database.
The Future Of Vaultless Tokenization
The future looks bright for vaultless tokenization, and one of the main reasons for this is that it allows organizations to easily meet international regulatory compliance laws and obligations thanks to its capabilities of removing the presence of clear-text cardholder data.
Like what we mentioned earlier, vaultless tokenization eliminates the requirement for a token vault, meaning that the process with the vaultless tokenization involves secure cryptographic devices in order to create tokens using algorithms and encryption keys.
With vaultless tokenization, all the required sensitive data remains encrypted throughout the payment process, which eliminates cleartext cardholder data from the network, meaning that the process of generating tokens can become automated.
Not only that, but sensitive data that’s stored through vaultless tokenization is not required to be replicated in data centers, meaning there will be noticeable reduced latency.
In the future, we will be seeing vaultless tokenization technology in organizations, government agencies, and even healthcare providers.