Data Encryption: How It Works and Why Your Business Needs It

Data encryption is a cornerstone of cybersecurity, transforming readable information into an unreadable format to protect it from unauthorized access—so simple, yet so effective!

This article breaks down the essentials of data encryption in a straightforward, easy-to-understand way. You'll learn how encryption works, the key algorithms like AES and RSA, and how to apply these tools to secure your organization’s data—whether it's stored on your servers or in transit across networks.

We'll also cover practical steps for integrating encryption into your broader cybersecurity strategy. This guide is designed to give you the knowledge you need to make informed decisions about data security without getting lost in technical jargon.

Understanding data encryption: How it works

Encryption secures data by converting readable information (plaintext) into an unintelligible format (ciphertext) using algorithms and encryption keys. For example, an email containing sensitive business details could be transformed into a string of seemingly random characters, which is meaningless without the corresponding key to decrypt it.

Encryption algorithms use mathematical formulas to keep data secure. Even though encrypted data might look random and confusing, it actually follows a specific pattern and “makes sense” in a structured way. These algorithms work with encryption keys to turn data into ciphertext and back into readable form (plaintext).

When someone encrypts data, the recipient needs the right key to decode it. This ensures that only authorized people can access the confidential information, even if someone else manages to intercept it. One common threat is brute-force attacks, where hackers try to guess the decryption key.

Here’s a step-by-step breakdown of how encryption works:

1. Plaintext: The process starts with readable information, such as emails, customer data, or financial records.
2. Encryption algorithm: A mathematical algorithm, like AES (Advanced Encryption Standard), is applied to scramble the data.
3. Encryption key: A unique encryption key (think of it as a password) is used by the algorithm to transform the plaintext into ciphertext, an unreadable, scrambled version of the original data.
4. Ciphertext: Once encrypted, the data becomes ciphertext and is securely stored or transmitted. Without the decryption key, this information is meaningless to unauthorized users.
5. Decryption: Authorized users with the correct decryption key can reverse the encryption process, turning the ciphertext back into readable plaintext.

The role of encryption keys

Encryption keys are fundamental to the encryption process, acting as the secret ingredient that enables the transformation of readable data into an unreadable format and vice versa.

What is an encryption key?

An encryption key is a unique piece of information used by encryption algorithms to encode and decode data. Keys are generally not physical objects but digital constructs.

Here’s a quick overview of what they can look like and how they work:

1. Digital representation: Most encryption keys are digital, represented as sequences of characters or numbers. For example, an AES key might be a long string of binary digits or hexadecimal numbers. The format depends on the algorithm and key length (e.g., 128-bit, 192-bit, or 256-bit for AES).
2. Key files: In some cases, encryption keys are stored in files, which may be in a specific format depending on the software or system using them. These files are typically protected by additional security measures and can be transferred or backed up digitally.
3. Key pairs: For asymmetric encryption (like RSA), keys come in pairs: a public key and a private key. The public key is shared openly, while the private key is kept secure and confidential. These pairs are also represented digitally.
4. Hardware security modules (HSMs): For added security, encryption keys can be managed by specialized hardware devices known as Hardware Security Modules. HSMs physically secure the keys and perform encryption operations. Regulations like GDPR, HIPAA, and PCI DSS often require robust key management practices and HSMs can help with compliance.
5. Smart cards and USB tokens: These are physical devices that store encryption keys securely. They typically contain a microprocessor or memory chip that stores encryption keys and other security information. When you need to use these keys—whether for logging in, signing documents, or encrypting data—the device performs the operation without exposing the key itself.

Types and levels of data encryption

Symmetric vs. asymmetric encryption

Encryption systems fall into two main categories: symmetric and asymmetric.

Data encryption standards

Data encryption standards vary in their level of security and performance. Here’s a brief overview of some key algorithms:

• Data Encryption Standard (DES): Once a cornerstone of symmetric encryption, DES is now considered outdated due to its 56-bit key length, which is vulnerable to brute-force attacks. It has been largely replaced by stronger algorithms like AES.
• Advanced Encryption Standard (AES): AES replaced DES and is considered much more secure. AES-256, with its 256-bit key length, is highly resistant to all known forms of attack, making it the default choice for encrypting sensitive data. It’s fast and efficient for both hardware and software applications, from disk encryption to secure communications.
• Triple DES (3DES): An upgrade to DES, 3DES encrypts data three times using different keys for added security. While more secure than DES, 3DES is significantly slower than AES, and its use is now deprecated in favor of AES.
• RSA (Rivest-Shamir-Adleman): RSA is an asymmetric encryption algorithm that relies on the mathematical difficulty of factoring large prime numbers. It uses a pair of keys for secure data transmission and digital signatures. It is widely used in various security protocols, including TLS, to facilitate encrypted communications.
• TLS (Transport Layer Security): TLS is a protocol designed to secure communications over a network. It employs various encryption algorithms, including RSA and AES, to protect data in transit. While TLS itself is a protocol rather than an encryption algorithm, it’s crucial for secure web browsing and other online activities.

End-to-End Encryption (E2EE)

End-to-end encryption ensures that data is encrypted on the sender’s side and can only be decrypted on the other end when it reaches the recipient. Not even the service provider can access the content. E2EE is commonly used in messaging apps, such as WhatsApp or Signal, to prevent unauthorized third parties from reading the content of messages during transmission. Fun fact: It may surprise you that Slack, a popular business messaging app, does not use E2EE!

For businesses, E2EE is critical in protecting intellectual property or sensitive data during communication. Without this protection, even if a hacker intercepts the data, they won’t be able to decipher it without the correct decryption key.

Encrypting data at rest and in transit

It’s important to understand that data exists in two key states—at rest and in transit—each with its own set of risks. To keep your business secure, you need to address both.

Data at rest: Protecting stored information

Data at rest refers to information that's stored somewhere—on servers, databases, hard drives, or in the cloud (read more about cloud data security in a separate article). Even though this data isn’t actively moving, it’s still vulnerable to unauthorized access.

From a business owner’s perspective, think of data at rest as assets stored in a secure vault. Encryption acts as the vault’s locking mechanism, ensuring that even if someone gains physical or digital access to your storage, they can’t decipher the data without the correct key.

Data in transit: Securing information on the move

Data in transit is information that's actively being transferred—whether it’s moving across the internet, internal networks, or between parts of a cloud service. This type of data is particularly at risk of interception, making it a prime target for cyberattacks.

For a business owner, data in transit is akin to sending valuable information through a messenger. Encryption is the security envelope that protects the contents of the package, ensuring that only the intended recipient can open and access the data. Implementing strong encryption for data in transit not only safeguards your business transactions but also builds trust with customers by ensuring their data is secure during transmission.

Why you need to encrypt both

Encrypting both data at rest and in transit is crucial because each state faces different threats. Data at rest is at risk from unauthorized access, while data in transit could be intercepted or tampered with. To fully protect your sensitive data, you need to have strong encryption in place for both.

By encrypting both data at rest and in transit, you can significantly reduce the risk of data breaches and ensure compliance with data protection laws.

Best practices for data encryption

Below are some best practices to ensure your encryption strategy is effective:

Use strong encryption algorithms

Not all encryption algorithms are equally secure. Select algorithms that offer robust protection while maintaining performance.

• AES-256: The security of encryption relies heavily on the strength of the algorithm and key length. For instance, while 128-bit encryption is adequate for many applications, 256-bit encryption, such as AES-256, provides a higher level of security. AES-256 is highly resistant to brute-force attacks due to the vast number of potential keys (2^256) that attackers would need to try to break it. It provides strong security with minimal performance trade-offs and is used by banks, government agencies, and tech companies to encrypt databases and customer records.
• RSA: For data in transit or for digital signatures, RSA offers a reliable public-key encryption method. However, it is generally slower than AES, making it best suited for smaller datasets or secure communications. It's commonly employed for securing data in transit (such as in SSL/TLS for web traffic) and for creating digital signatures.

Proper key management

Encryption is only as secure as its key management practices. Failing to properly manage encryption keys can lead to data breaches, even if encryption is strong.

• Secure key storage: Store keys in dedicated, secure environments like Hardware Security Modules (HSMs). HSMs provide physical and logical protection against theft or tampering.
• Key rotation: Periodically rotate keys to prevent long-term exposure. Compromised keys are a common vulnerability, and regularly refreshing them limits the risk of breaches.
• Access controls: Limit access to keys, ensuring that only authorized personnel can decrypt sensitive data. Implementing stringent access controls ensures that keys are only used by those who need them for legitimate purposes. Read about the Zero Trust Approach to understand how to never assume trust.
• Backup and recovery: Maintain secure backups of encryption keys to prevent data loss in case of hardware failure or other issues. Ensure that these backups are also protected against unauthorized access.

Encrypt data at rest and in transit

Data at rest includes files stored on databases, hard drives, or cloud services, while data in transit refers to information being transferred over networks. Both states are vulnerable to breaches, so it’s crucial to apply encryption consistently.

• Data at rest: Use full-disk encryption (FDE) or file-level encryption. For instance, applying AES-256 encryption to your storage systems ensures that if physical devices or servers are compromised, the data remains inaccessible without the encryption key.
• Data in transit: Protect data during transfers using encryption protocols like TLS. These secure data moving between servers, users, or external parties by preventing interception and tampering. For example, TLS is widely used in web traffic encryption to secure data transfers between browsers and web servers.

Adopt End-to-End Encryption (E2EE)

E2EE ensures that data remains encrypted throughout its journey, from sender to recipient, without being decrypted at any intermediary point. This level of encryption is ideal for highly sensitive communications and is frequently used in messaging apps, financial transactions, and healthcare records.

For instance, if your business deals with customer transactions, using end-to-end encryption prevents external parties, including service providers, from viewing sensitive data.

Encrypt backup and archived data

Often, backups and archived data are overlooked when it comes to encryption, but they remain just as vulnerable to data breaches. Encrypt all backup media and archived files to protect against unauthorized access or data recovery from stolen hardware. You may also benefit from reading our article about the Security Risks of External Devices.

Monitor and audit encryption compliance

Maintaining encryption compliance across your business systems requires continuous monitoring and auditing.

• Encryption audits: Regularly audit encrypted systems to ensure that they are functioning correctly and that encryption protocols are up-to-date. This is crucial in industries regulated by laws like GDPR and HIPAA, where companies must demonstrate compliance with data protection requirements.
• Logging and monitoring: Implement tools that monitor the use and access of encryption keys, like data loss prevention software. If unusual activity is detected, such as failed attempts to access the keys, alerts can be triggered, and immediate action can be taken.

Train employees on encryption policies

Human error is a common weak point in data loss prevention. Employees need to understand the importance of encryption and how to handle sensitive data.

• Education: Provide regular training sessions on data protection best practices, including encryption, such as how to properly encrypt files and ensure secure transmission. Emphasize the risks of not encrypting data, including potential data breaches, fines, and loss of customer trust.
• Phishing prevention: Since phishing remains a very common tactic to steal encryption keys or gain unauthorized access, educate employees on identifying phishing attempts. Data Loss Prevention (DLP) solutions like Safetica’s can also detect suspicious activities and prevent the exposure of encrypted data. Read our comprehensive guide to preventing phishing.

Enhancing security with Safetica’s DLP solutions

While encryption is a powerful tool for securing data, relying solely on it is not enough. Encryption should be part of a broader security strategy that includes access controls, DLP solutions, and regular monitoring.

Safetica’s Data Loss Prevention software provides a comprehensive solution that integrates encryption with advanced data protection features, ensuring that your business remains secure on all fronts.

Our DLP solutions are designed to help businesses identify, monitor, and protect sensitive data across all endpoints. Whether you’re concerned about data at rest, in transit, or in use, Safetica offers robust tools that can:

• Prevent data leaks: Safetica's software continuously monitors data flows within your organization, identifying potential risks before they become serious threats. This proactive approach to data security helps prevent accidental or malicious data leaks.
• Enhance compliance: With built-in compliance support, Safetica simplifies meeting regulatory requirements such as GDPR, HIPAA, and PCI DSS. The software’s comprehensive reporting and audit features allow you to demonstrate compliance effortlessly.
• Implement Zero Trust policies: Safetica supports Zero Trust principles by enabling granular access controls and continuous monitoring of user activities, ensuring that sensitive data is only accessible to authorized personnel.

By integrating Safetica’s DLP software into your security strategy, you can enhance your encryption efforts with additional layers of protection, making your business more resilient against modern threats.