What is Data Encryption and How Does It Work?

The world is online, and your data is everywhere – in financial records, emails, medical files, and even in the pictures you upload to social media. If left unprotected, your data is vulnerable to prying eyes, hackers, and breaches. You need a digital vault to keep this data secure. That is where data encryption comes in, making your information unreadable to anyone without authorisation.

Data encryption is a security measure that involves converting your data into an unreadable format (ciphertext) that can only be decoded using a specific encryption key.

In other words, data encryption scrambles your confidential information so that only those with a secret key can decipher it. Even if someone intercepts the message, all they see is a jumbled mess of numbers and letters. It’s impossible to read, let alone understand.

To begin developing your knowledge of data encryption, the best place to start is understanding how it works. Let’s take a look.

How does encryption work? In general, it consists of five simple components:

1. The algorithm - Encryption software uses complex algorithms to transform your data from its original form into ciphertext (a jumbled mess of symbols).
2. The encryption key - The key acts as a passcode that can transform the ciphertext back into its original, readable form. Only those with the right key can read the data.
3. Secure transmission - Once the data is encrypted as ciphertext, it travels to its destination through a secure network. Even if it’s intercepted, it’s unreadable.
4. Key exchange - Secure key exchange protocols make sure the key reaches the intended recipient rather than falling into the wrong hands.
5. Authentication - A final layer of authentication verifies the identity of the sender and receiver, preventing impostors from slipping through the cracks.

While this is an overview of the process, it isn’t always that simple. For example, the approach changes depending on whether you choose asymmetric or symmetric encryption.

There are two different methods of data encryption that are most commonly used today:

• Symmetric encryption uses the same key for encryption and decryption. It’s commonly used for encoding large datasets, such as databases of sensitive customer information. It’s faster, but less secure, as you’ll need to send the key to the recipient over a network.
• Asymmetric encryption uses a pair of keys: one public and one private. The public key encrypts and the private key decrypts, allowing parties to communicate securely without needing to send a key over a network.

Many modern cryptographic systems use a hybrid of these two methods. For instance, SSL/TLS uses asymmetric encryption to securely exchange a key and then symmetric encryption for the actual data transfer. This provides the best of both worlds: security plus speed.

The security of encrypted data hinges on keys — strings of random characters that fit into the specific grooves created by the encryption algorithm, similar to how a key fits into a padlock.

There are several types of encryption keys, each serving a specific purpose depending on the types of data being encrypted.

• Symmetric key - This is a single key that both encrypts and decrypts ciphertext. It’s often used for bulk data encryption, such as securing business files.
• Asymmetric keys - This is a pair of keys, one public and one private. Any party can use the public key to encrypt data before sending it to the private key owner to decrypt.
• Session keys - Many secure communication protocols over the internet generate a unique session key for each session. This comes from a combination of symmetric and asymmetric encryption.
• Hashing keys - Hash functions use keys to create a fixed-size hash value or checksum for a given set of data. This method is often used for things like hashed passwords and digital signatures. Be aware that hashing is non-reversible.
• Key derivation keys - These keys turn a single secret value, like a password, into one or more strong encryption keys. This improves security by removing the need for passwords, helping to protect against brute-force attacks on password-based systems.
• Initialisation vectors (IVs) - IVs are used alongside encryption algorithms to ensure that the same plaintext doesn't encrypt to the same ciphertext every time. They add randomness to the encryption process.

Encryption keys are the backbone of proper digital communication, but they’re also the weakest link in the chain. It’s essential to make sure they’re exchanged securely to mitigate risk.

This may all seem like a lot of effort to keep your information secure, but the advantage of data encryption goes beyond private communications. Here are four benefits of data encryption that show why it’s so essential for businesses:

• Protection - Encryption prevents everything from personally identifiable information (PII) and financial data to trade secrets and business plans from falling into the wrong hands.
• Compliance - Safeguarding data is legally required in many industries. ‌GDPR and HIPAA both require businesses to encrypt their data to meet compliance, for example.
• Trust - Consumers want to know their sensitive data is safe. Encryption can show that you take your security seriously, leading to increased trust and a solid reputation.
• Continuity - Encrypting your data makes sure your data remains unreadable if a system or device gets breached. This protects you against worst-case scenarios.
• Risk mitigation - Encryption limits access to data even for employees. This reduces the risk of insider threats, which account for more than 25% of data breaches.

Ultimately, encryption is like a silent guardian. It makes sure only authorised individuals can access sensitive information, safeguarding you from external and internal attacks. Let’s take a closer look at what these threats are and why they’re posing such a problem.

Cyber threats pose a huge challenge to contemporary data encryption solutions, so much so that damages are expected to reach $10.5 trillion in 2025.

As technology advances, so do the tactics malicious actors employ. This means businesses need to be constantly on their guard to keep their encryption measures up to standard.

Here are the current issues that are leading to data getting hacked:

• Key management: Weak key management practices can render encryption ineffective and compromise data security.
• Encryption backdoors: Encryption backdoors, which allow law enforcement access to encrypted data, raise concerns about privacy and security.
• Vulnerability of encryption algorithms: Over time, cryptanalysis techniques can reveal weaknesses in existing encryption algorithms.
• Social engineering attacks: Hackers may try to trick users into revealing their decryption keys or granting access to encrypted data.

Continuous innovation, updates, policies, and security postures are essential to any business that wants to navigate evolving threats. In the next section, we’ll look at some recent examples of these threats to show why effective data encryption is so essential.

A lack of encryption can quickly turn a breach into a crisis for businesses.

For instance, in February 2025, a ransomware group infiltrated Genea (a major Australian IVF provider) and leaked more than 700 GB of confidential patient information, including medical histories and contact info.

While Genea obtained a court order to prevent further data spread, experts criticised the company for failing to secure sensitive records in the first place. Once the ransomware group was in the system, they had free access to the highly sensitive records.

Data breaches aren’t always the effect of external threats, either. In March 2025, Victorian Ambulance suffered a data breach that exposed the records of 3,000 employees. The cause? A disgruntled employee exposing the data of their colleagues.

Encryption isn’t just about stopping hackers. It acts as a barrier to all unauthorised users, including insider threats. It makes sure access doesn’t automatically equal exposure.

For consumers, encrypting data can be as simple as turning on device encryption, storing files in the cloud, or using an encrypted messaging app.

For businesses, though, things get a little more complicated. You’re no longer encrypting a few files but hundreds, if not thousands, of mission-critical assets, including customer data and financial information.

As such, encryption needs to be robust, covering data when it’s both at rest (stored in business systems) and in transit (on its way to a destination). Here are some common approaches:

• Advanced Encryption Standard (AES) - The gold standard of symmetric block cipher encryption. With 256-bit keys, hacking AES-encrypted data is near impossible.
• Rivest-Shamir-Adleman - This is the go-to method for asymmetric encryption. It’s ideal for file sharing, emails, and any other form of secure communication.
• Data Encryption Standard - This was once the standard encryption method, but it’s now outdated. AES improves upon this method in every way.
• Triple DES - A stopgap improvement over DES. It’s still used in some legacy systems, but it still falls short compared with more modern standards like AES.
• Elliptic Curve Cryptography - Strong security with short key lengths, making it ideal for mobile devices and IoT environments.

While each of these algorithms has its place, especially in older systems, AES is the most reliable choice for modern business encryption. It has the perfect balance between security and speed. There’s a reason it’s the solution Salesforce uses to protect customer data at scale.

Data encryption is the process of converting plain, readable data into an unreadable format using algorithms and cryptographic keys.

Database encryption involves either encrypting data from the entire database or specific fields within it to protect the stored information.

Both of these algorithms have their place when keeping your data secured. While data encryption ensures secure data transfer and storage, database encryption takes a more holistic approach. A combination of both equals a robust, multi-layered encryption strategy.

Let’s round things off with some best practices to keep in mind when deciding on your own data encryption method.

• Pick the right keys- Choose encryption algorithms with strong key sizes and proven track records against known vulnerabilities.
• Implement robust protocols - Consider dedicated key management solutions, including secure key generation, storage, encryption key management and distribution for centralised control and enhanced security.
• Encrypt data across its lifecycle - Don't limit encryption to just data at rest. Include data in transit (e.g., emails, file transfers) and data in use (e.g., databases with real-time access) for comprehensive protection.
• Conduct regular security awareness training - It's vital to educate employees on the importance of data security and best practices for handling encrypted information.

Lastly, remember to stay informed about emerging threats. Cyber crime is always evolving. Update your encryption methods and key management practices regularly to stay one step ahead.

Strong encryption protection safeguards your data and ensures unauthorised access never translates into data exposure. Choosing a strong encryption key and algorithm will form the foundation of an effective strategy that keeps you protected and minimises risk.

Remember that information security goes beyond encryption. You need to look at the big picture and approach your data protection strategy holistically, ensuring your information is protected from acquisition to disposal, and at every juncture in between.

Salesforce Data Cloud will unify and activate all of your customer data across every application, system, and database, giving you complete visibility and control over your sensitive information.

You’ll also benefit from Shield 2.0, the native AES security solution for Salesforce, giving you everything you need to protect your PII, encrypt your sensitive information, and proactively defend against threats.

Get started today to see what’s possible.