Data Security: Tokenization vs. Encryption

Encryption and tokenization both aim to protect data, but the manner in which each method does so varies. It’s important to begin by understanding the core concepts for each of these methods of protecting data before diving deeper into the specific differences between the two.

What is tokenization?

Tokenization is the process of turning an important piece of data (for example an account number) into a random string of characters called a token. Tokens are a reference to the original data but cannot be used to reverse-engineer or to derive the source values. Since tokens have no meaningful information attached to them, this method of data security can be very appealing.

There are two main methods of tokenization: traditional and vaultless.


This method uses a centralized storage location (also known as a token vault) to store the relationships between the original sensitive values and the tokens. The real data is then secured within that vault, usually in an encrypted form. The publicly exposed field, a credit card number for instance, only contains the token reference, not the sensitive data. If the original sensitive information is required, a match is made with the token and the token vault through an authorized means, and the stored data can be retrieved.


Vaultless tokenization is a method in which the original data is never sent to a third-party storage location. This tokenization happens locally on the user’s device, and the sensitive data is never stored in a vault. Only the tokenized data is transmitted to another location for processing without ever exposing the original data. This method might be used when data sovereignty and privacy requires keeping the sensitive data in the local users’ control.

Tokenization uses:

Tokenization is often utilized by banks, merchants, payment processors or other institutions who operate in fields that require compliance with government and industry regulations. One of the most common ways we experience tokenization is online transactions. When you go to purchase an item and get to the checkout page, you may have a card saved ‘on file.’ If this is the case, you typically can only see a few of the credit card numbers, while the rest are hidden by asterisks. The entire set of credit card digits are actually stored as a token. The full data can only be seen by the destination and the original storage, ensuring your information is secure.

What is encryption?

Encryption refers to the method of utilizing a mathematical formula to convert readable text, known as plaintext, into an unreadable format called ciphertext. In order to decrypt the ciphertext to its original plaintext, you need to know both the encryption algorithm and a decryption key.

There are two commonly used data encryption methods: symmetric encryption and asymmetric encryption. These encryption methods can be applied to individual columns, to a specific application, or to a whole database.

Symmetric encryption

Symmetric encryption uses a single key for both encrypting and decrypting information. The drawback of this method is that both parties will need to have the same key that was utilized to encrypt the data in order to decrypt it. However, it is the fastest and most efficient way to encrypt large volumes of data.

Asymmetric encryption

Asymmetric encryption (also known as the public key encryption) uses two different keys for encryption and decryption. The public key is used to encrypt the data while the private key is used to decrypt.

Column-level encryption

Column-level encryption is a type of database encryption where particular columns or fields in a database are encrypted. This offers you enhanced control over data security and is frequently employed to safeguard particularly sensitive or personally identifiable information (PII).

Application-level encryption

Application-layer encryption pertains to the process of encrypting data within an application before it is stored in the database. This form of encryption can encrypt the vast majority of data managed and stored by an application, extending to OEM (original equipment manufacturer) and ISV (independent software vendor) software alike.

Encryption uses

Encryption allows you to safeguard various forms of data such as credit card details, database files, emails, and passwords. It provides secure protection for sensitive information on different levels depending on what is needed within a company. Overall, encryption can protect sensitive information, help you comply with data protection regulations, and even safeguard against data breaches.

What are the major differences between Tokenization and Encryption?

The biggest difference between tokenization and encryption is the relationship between the original data and the transformed data and the manner in which the data is transformed. However, there are a few other differences to consider when determining which method is the right fit for your business.

  • Scale

One of the big differences between encryption and tokenization is their ability to scale. Encryption more easily scales to large data volumes which makes it ideal for data security applications like big databases or servers. On the other hand, tokenization is difficult to scale securely without impacting performance as size increases. Additionally, tokenization may become more costly to scale as it reaches capacity limitations more quickly. Because of the difficulty to scale, typically only the most sensitive data field is tokenized while related information is left in clear text. For instance, the credit card number is tokenized but the name, address, phone, etc. remain unprotected.

  • Compliance

When considering between tokenization and encryption, it’s important to note that some standards mandate the use of encryption while others will allow tokenization as the method of securing data. It all depends on the specific standard of compliance you are attempting to meet. Some compliance standards provide exact requirements. For example, tokenization is required for PCI DSS Compliance, while other compliance standards can be attained through a more generalized encryption approach.

Our encryption solution simplifies the process and takes the guesswork out of meeting compliance standards by providing key components for standard protection protocols.

  • Data fields

Encryption is typically used for structured data fields but can also be used for unstructured data, such as entire files. Alternatively, tokenization is solely used for structured data fields like payment card information or social security numbers.

  • Data exchange

Encryption is a great match for security needs when they entail exchanging sensitive data with third parties who have the encryption key. Tokenization makes it more difficult to exchange data as it requires direct access to a token vault.

  • Use cases

Another distinct difference between tokenization and encryption can be seen in the typical use cases for each. Encryption is often used to secure data exchanges, protect data at rest, and to protect structured as well as unstructured data. Meanwhile, tokenization is employed by payment processing systems and only handles structured data. Tokenization is typically utilized when customers make purchases without entering their personal data or credit card information into application-based payments, digital wallets, recurring subscriptions, and website payment forms.

The main determinant of which method you should use in your organization is dependent on specific use cases and needs. For some organizations, it may even be appropriate to use a combination of the two rather than choosing just one type of data protection.

About NetLib Security

NetLib Security has spent the past 20+ years developing a powerful, patented solution that starts by setting up a formidable offense for every environment where your data resides: physical, virtual and cloud. Our platform simplifies the process while ensuring high levels of security.

Simplify your data security needs. Encryptionizer is easy to deploy. It is a cost-effective way to proactively and transparently protect your sensitive data that allows you to quickly and confidently meet your security requirements. With budget considerations in mind, we have designed an affordable data security platform that protects, manages, and defends your data, while responding to the ever changing compliance requirements.

Data breaches are expensive. Security does not have to be.

NetLib Security works with government agencies, healthcare organizations, small to large enterprises, financial services, credit card processors, distributors, and resellers to provide a flexible data security solution that meets their evolving needs. To learn more or request a free evaluation visit us at www.netlibsecurity.com.