What is the key difference between tokenization and encryption?

The key difference between tokenization and encryption lies in how they manage sensitive data. Tokenization replaces sensitive data with non-sensitive substitutes, known as tokens, which can be mapped back to the original data only through a secure mapping system. This means that if a token is intercepted or compromised, it holds no intrinsic value, as it cannot be reverse-engineered back to the original data without access to the secure mapping database.

In contrast, encryption transforms the data into an unreadable format using mathematical algorithms, requiring a decryption key to revert it to its original form. The transformed data remains linked to the original, and if an encryption key is compromised, the original data can potentially be accessed.

Understanding this distinction highlights the use cases for each method; tokenization is preferred in scenarios where data needs to be replaced entirely for security and compliance reasons, while encryption is typically used to secure data in transit or at rest without altering its form.