Tokenization Vs Encryption? Know the difference!

Home/Blockchain, Decentralized Finance, Non Fungible Token/Tokenization Vs Encryption? Know the difference!

Tokenization Vs Encryption? Know the difference!

Tokenization has recently gained popularity as an efficient obfuscation method, particularly among retailers. Tokenization is closely linked to encryption, and although there are similarities, it differs from encryption in that tokenization utilizes tokens rather than keys to achieve encryption.


Encryption is a notion that most people are familiar with. It combines a mathematical method and some additional secret information (an encryption key) to change data in a manner that is almost impossible to reverse without the proper key.

Traditionally, this required converting the data to an unreadable binary string typically longer than the input. However, if a complete file system, database, or dataset was encrypted and subsequently decrypted, either manually or automatically (transparently), on usage, the modification had little effect.

When adding field-level encryption to existing programs and data stores, on the other hand, there was a substantial impact: program variables, database column definitions, and file layouts all had to be modified, and disk space consumption increased, sometimes significantly.

This final issue is solved by format-preserving encryption pioneered by Voltage Security in the late 2000s. It generates ciphertext that retains the input size and alphabet.

The Benefits of Encryption

Encryption may be used to safeguard a wide range of data types. For example, encryption may safeguard unstructured data such as files or emails, in addition to credit card information or social security numbers (unlike tokenization). Thus, it is best suited for protecting whole documents, while tokenization is best suited for protecting smaller bits of data such as account numbers. Tokenizing huge amounts of data would almost certainly result in latency problems and would be useless.

Encryption enables you to exchange decryption keys with others and view files remotely without exposing yourself to security risks. Tokenization requires you to create a safe method of transmitting the original information so that they can decode the token. However, with encryption, all that is needed is the key.

Encryption procedures are often faster than tokenization operations. Tokenization takes much longer since each letter or number is replaced with a random character. Regardless of the size of your database, encryption utilizes algorithms to protect data, which takes less time than the whole tokenization process.

Encryption's Drawbacks

To begin with, all hackers need to access secured data is the decryption key. Data is encrypted using a single key instead of tokenization, which uses a collection of random tokens to secure the information. If hackers get that key, everything it encrypts becomes susceptible. Whether the encryption is file-based or the whole disk, this may cover the entire database or just a single file. Regardless, the security dangers presented by a compromised encryption key exceed the advantages in certain cases.

Encryption may also make software less functional. The ciphertext employed in encryption may not be compatible with other software tools, limiting their usefulness and value. Depending on the encryption software you choose, you may be restricted to a small number of suppliers for your other software needs.

Furthermore, many recent high-profile data breaches included systems secured by database encryption but lacked other security measures such as multi-factor authentication. These additional levels of protection are necessary to safeguard your encryption keys, but they also demand that your time and resources be stretched even further.

Vendors of Encryption Software

When looking at encryption alternatives, there are many encryption software options to select from.
Two of the most popular choices are Bitlocker and McAfee. Bitlocker works with Windows operating systems to protect against data breaches and identity theft. Alternatively, McAfee offers complete disk encryption, which encourages endpoint encryption, so your end users are secured without incurring system slowdowns.

AxCrypt is another encryption application that supports cloud management for securely storing data and information. AxCrypt has capabilities that allow users to securely exchange encryption keys, manage passwords, and handle encryption while on the move.

FileVault is a macOS encryption software that encrypts the whole startup drive. This is a good choice if your business utilizes Macs and you need a dependable way for your employees to protect their laptops and data.


The word “tokenization” originates from the Payment Card Industry Data Security Guideline (PCI DSS), a well-known standard for safeguarding payment-related data.

When PCI DSS v1.0 was published in 2008, merchants were obliged to implement it “At the minimum, make [credit card Primary Account Numbers, or PANs] unreadable wherever they are kept… Strong one-way hash functions (hashed indexes), truncation, index tokens, and pads are used… Strong cryptography, on the other hand.”

These options reflect several usage cases: Hashes are excellent for data anonymization, but their irreversibility makes them less than ideal if the cleartext is ever required again.
Truncation is the process of storing just a portion of the data. Again, this works only if the whole cleartext is never needed.

Index tokens and pads are examples of tokenization, which replaces a value with a randomly generated value.

This method is described in more detail in more recent editions of PCI DSS:

An index token is a cryptographic token that substitutes the PAN with an unexpected value depending on a specified index. For example, a one-time pad system uses a randomly generated private key just once to encrypt a message, which is then decoded using a matching one-time pad and key.

The Benefits of Tokenization

To begin with, tokenization ensures that your data is not necessarily affected in the event of a breach. However, according to Statista, there were 540 data breaches in the first half of 2020, indicating that these dangers are not taken lightly. Fortunately, businesses that utilize tokenization have a safeguard in place: instead of getting access to critical data, hackers can only view worthless tokens.

Tokenization, on the other hand, lowers the in-house responsibility for maintaining sensitive data. For example, when you and your business decide to gather customer data, you are in charge of guaranteeing its security. In addition, data may be stored in a third-party database using tokenization software. Consequently, your company is not obliged to keep the personnel and resources necessary to handle sensitive data.

Though tokenization does not remove PCI-DSS and other compliance obligations, storing tokens instead of sensitive data may minimize your team’s compliance work. In addition, tokenization will likely simplify the software tools and activities required to demonstrate compliance, saving you precious time and money.

Tokenization's Drawbacks

Tokenization, like other security methods, adds complexity to your IT architecture. Tokenization, for instance, complicates the procedures your company’s ecommerce platform takes to complete a transaction. To keep the customer’s billing information secure while approved, it must go through detokenization and retokenization processes.

However, before you can accept transactions, you may discover that your chosen payment processor does not allow tokenization.

A small number of payment processors still support tokenization, so you may have to settle for a payment processing solution that is not your first choice.

Furthermore, tokenization does not remove all security concerns, particularly when it comes to third-party token vaults. While keeping data offsite simplifies many elements of data security, it also requires you to verify that the vendor you select has enough procedures in place to safeguard your data.

Vendors of Tokenization Software

Tokenization is a newer data security technique, but numerous solutions support it.
TokenEx provides conventional vault tokenization, which is compatible with all payment processor tools. In addition, it provides a high level of freedom, allowing you to generate, verify, and remove tokens as you see fit.

Thales Ciphertrust also provides vaulted tokenization, as well as the option of going vaultless. This is accomplished via dynamic data masking, in which administrators may set rules to hide a portion of a field depending on who is accessing and viewing the data.

Bluefin and Imperva, for example, are data and payment security businesses that mainly provide vaultless tokenization solutions that combine tokenization algorithms with encryption techniques. They aim to remove the requirement for token vaults, thus minimizing the latency problems caused by conventional vaulted tokenization.


The decision between both the above concepts is not always simple. Whether your organization should use tokenization or encryption is determined by your specific needs. Tokenization is a choice if you desire to remain compliant, thereby lowering your PCI DSS responsibilities. On the other hand, if you need scalability and there is a need to encrypt huge amounts of data, encryption is perfect. This is because it will require an encryption key.

- Contact Us -

SoluLab being the top 3 Blockchain developers can help you build the perfect smart contract applications.
By |2021-08-11T16:59:39+05:30July 31st, 2021|Blockchain, Decentralized Finance, Non Fungible Token|Comments Off on Tokenization Vs Encryption? Know the difference!

About the Author:

Sonal Mehta is a Content Lead at Solulab, USA based leading Blockchain Technology, mobile apps and software development agency, started by Ex vice president of Goldman Sachs, USA and Ex iOS lead engineer of Citrix. Solulab help build startups - we are a no-sweat technical partner for early stage entrepreneurs to launch ideas from scratch and for later stage startups to build more quickly and affordably.


Get to know us.


Say Hello !