// GLOSSARY -- SECURITY & COMPLIANCE

What is Encryption?

1 min read Updated

Encryption is the process of converting data into an unreadable format using cryptographic algorithms — protecting information confidentiality so that only authorized parties with the correct key can access it.

WHY IT MATTERS

Encryption is fundamental to digital security. In crypto, encryption protects: private key storage (encrypted keystores), communications (TLS for API calls), and increasingly on-chain data (through zero-knowledge and fully homomorphic encryption).

Important distinction: blockchain uses cryptographic signing (proving authorship) more than encryption (hiding data). Public blockchains are transparent by design — data is verified, not encrypted. Privacy features require additional encryption layers.

Emerging encryption technologies — Fully Homomorphic Encryption (FHE) enabling computation on encrypted data, and threshold encryption — promise new capabilities for blockchain privacy and confidential DeFi.

FREQUENTLY ASKED QUESTIONS

Are blockchain transactions encrypted?
No — public blockchain transactions are transparent and visible to everyone. Encryption is used for key storage and off-chain communication, not on-chain data (on most chains).
What is end-to-end encryption?
A communication method where only the sender and recipient can read messages — the service provider can't. Used in messaging apps. Some crypto wallets use E2E encryption for key sync.
What is FHE?
Fully Homomorphic Encryption allows computation on encrypted data without decrypting it. This could enable confidential DeFi — smart contracts that process private transactions. Still early but advancing rapidly.

FURTHER READING

Enforce policies on every tool call

Intercept is the open-source MCP proxy that enforces YAML policies on AI agent tool calls. No code changes needed.

npx -y @policylayer/intercept
github.com/policylayer/intercept →
// GET IN TOUCH

Have a question or want to learn more? Send us a message.

Message sent.

We'll get back to you soon.