Thursday, March 28, 2024

Advantages of Tokenization over Encryption for Data Security

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Data security presents a significant challenge for many organizations as the volume and sensitivity of the data that they have collected grows. Some organizations take a “one size fits all” approach to data security, using encryption to protect sensitive data in all situations. However, data tokenization has a number of advantages over data encryption if used in the correct context.

The Need for Data Security

Data security has always been an important priority for organizations. A loss of sensitive internal data could impact an organization’s ability to compete in the marketplace, and a breach of customer data could result in lawsuits and other embarrassment to the business.

In recent years, the stakes have risen for data protection. New data privacy regulations, such as the European Union’s (EU’s) General Data Protection Regulation (GDPR) and the California Consumer Privacy Act (CCPA), have introduced new restrictions on the use of customers’ personal data and the fines for non-compliance. Under the GDPR, a breach of customers’ personal data could result in a fine of 4% of global turnover or 20 million Euros, whichever is larger.

The organizations that police these new laws have also demonstrated a willingness to enforce them. Multiple organizations have been penalized under the GDPR since it began to be enforced in May 2018. For example, British Airways was fined $230 million by the Information Commissioner’s Office (ICO), the GDPR regulator in the UK, for a data breach affecting 500,000 customers.

Approaches to Data Protection

Sensitive data can be protected from breach in several different ways. Two of the most common methods for data protection are data encryption and tokenization.

  • Data Encryption

Encryption algorithms are designed to protect data using a completely reversible transformation. The encryption algorithm is a mathematical function that takes the data to be protected and a secret key as inputs and produces an output with no visible relation to the input. A decryption algorithm (which may or may not be the same as the encryption algorithm) takes a secret key (which may or may not be the same as the secret key used in encryption) and reverses the process to produce the original data.

Encryption algorithms are useful because they enable data to be securely stored or transmitted. Anyone without access to the secret key(s) cannot read the data, but anyone with possession of the key(s) can easily reverse the encryption process.

  • Data Tokenization

Data tokenization is a one-way process by which sensitive data is replaced by a non-sensitive substitute or “token”. For example, a bank account number or Social Security Number (SSN) could be replaced with a random value with the same length and features.

Reversing data tokenization requires access to the lookup table that links sensitive data values to their corresponding tokens. This means that tokens can be freely and securely used in place of the data values that they represent as long as access to the real values is unnecessary and the lookup table is appropriately secured.

Advantages of Data Tokenization Over Encryption

Encryption is probably the most well-known method of protecting sensitive data. However, data tokenization also has some advantages over encryption.

  • Data Usability

One of the biggest advantages and disadvantages of encryption is that no information regarding the original value is present in the ciphertext. This is a disadvantage because encrypted data rarely resembles or is formatted similarly to the data that it replaces.

The tokens created by tokenization, on the other hand, are flexible in the formatting so tokens can be designed to resemble legitimate values. This means that systems expecting data of a certain format could operate on tokenized data with no modifications, which is a significant advantage.

  • No Key Management

With encrypted data, the secret key is everything. Anyone with access to the secret key can decrypt the data, so it’s important to create mechanisms that ensure that legitimate users have access to it and illegitimate users do not.

These mechanisms can be complex and are a common target of hackers since it is easier to steal an encryption key than to break an encryption algorithm. Tokenization algorithms aren’t designed to be reversible (except through the lookup table) and have no keys to protect, which can decrease the complexity of the system and its security.

  • Simplified Security Audits

With data protection regulations come audits to ensure that data is properly protected. Since encrypted data could be decrypted to reveal the original data (with access to the secret key), any location where the keys or encrypted data are used is included in the audit.

With tokenization, the sensitive data is completely replaced by a non-sensitive token, and there is no mechanism to reverse the tokenization process to extract the original data. As a result, applications that only have access to tokenized data may not need to be included in data security audits.

Properly Securing Sensitive Data

Regardless of the mechanism, data security is a priority for all organizations. A breach of sensitive data could render research and development efforts useless or leave an organization open to regulatory penalties and potential lawsuits.

The right data protection mechanism often depends on the sensitivity of the data in use and how the protected data will be used within the organization’s environment. When selecting data protection solutions, it is important to look beyond encryption and consider other options, such as tokenization, as well.

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