Tokenization vs Hashing: A Comprehensive Comparison (with Examples)

Tokenization vs Hashing: A Comprehensive Comparison (with Examples)

Data breaches are increasingly becoming one of the greatest concerns for most organizations worldwide. In a report by Verizon dated 2017, it found out that 81% of data breaches are caused by stolen or weak passwords; this, therefore, calls in the importance of the security of the password in organizations. In countering this, cybersecurity has taken an even more advanced measure with tokenization and hashing.

Tokenization and hashing are two of the security approaches, each with distinct approaches to guaranteeing information security. Let's dive deep into these two awe-inspiring methods with GCT Solution.

What is Tokenization?

Tokenization is a process in which data is replaced with a special, random token that is never to be repeated. In tokenization, sensitive information such as credit card numbers, personal identification numbers, or any other valuable information is substituted, using a special kind of random token. The token contains no intrinsic value or meaning and is normally stored in a secure database. This token will eventually be used in place of the original data whenever a transaction or access request is made.

Tokenization mainly includes the aim of securing sensitive information through replacement with nonsensitive data to reduce associated data breach and unauthorized access.

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What is Hashing?

Hashing is a cryptographic technique that converts data into a fixed-length string of characters, typically a hexadecimal format. The resulting hash is unique to the input data but cannot be reversed to obtain the original information. Hash functions are designed to be one-way, meaning it is computationally infeasible to reverse-engineer the original data from the hash.

Hashing is commonly used for data integrity verification and password storage. For instance, when you enter your password on a website, it's hashed and compared to the stored hash. If they match, access is granted.

Examples of Tokenization vs Hashing

To provide a clearer understanding of these two techniques, we have included several examples below:

Tokenization Example:

For instance, if a customer makes an online purchase using his credit card, the real credit card number is not stored in the merchant's database, but generated and stored in place of the actual credit card number. That token is then made useful for transaction processing, which adds that layer of security to protect against potential breaches.

Hashing Example:

In a password management system, user passwords are hashed and stored in the database. When a user attempts to log in, the entered password is hashed and compared to the stored hash. If they match, access is granted, without the system ever storing the actual password.

Tokenization vs Hashing: How are They Different?

Purpose:

Tokenization is primarily used to protect sensitive data by substituting it with non-sensitive tokens. It is commonly employed in scenarios where retaining the original data is not necessary, such as payment processing and healthcare systems.

Hashing, on the other hand, serves the purpose of data integrity verification and password storage. It ensures that the data remains unchanged during transmission or storage and is commonly used in password management and digital signatures.

Reversibility:

Tokens can often be reversed back to the original data using a secure lookup process. This reversibility allows for the retrieval of the original data when needed, providing flexibility in certain applications.

Hashes are designed to be irreversible, meaning the original data cannot be retrieved from the hash. Once data is hashed, it cannot be reversed, enhancing security in password storage and data integrity verification processes.

Security:

Tokenization offers a higher level of security as the original data is not stored. Instead, only the tokens are stored, reducing the risk of data exposure in the event of a breach.

While hashing provides data integrity and password security, it does not offer the same level of protection against data breaches as tokenization. In hashing, the original data is not retained, but if the hash is compromised, the original data may still be vulnerable to attacks like brute force.

Use Cases:

Tokenization finds widespread use in payment processing, healthcare systems, and any scenario where sensitive data needs to be protected while retaining some level of retrievability.

Hashing is commonly employed in password management, data integrity verification, and digital signatures, where the original data does not need to be retained after processing.

Benefits of Tokenization vs Hashing

Tokenization Benefits:

• Enhanced Data Security: Tokenization significantly reduces the risk of data breaches by replacing sensitive information with non-sensitive tokens. As a result, even if the token data is compromised, the original sensitive data remains protected.

• Compliance: Tokenization aids organizations in complying with data protection regulations such as PCI DSS (Payment Card Industry Data Security Standard). By substituting sensitive data with tokens, organizations can minimize the scope of compliance requirements, simplifying the auditing process.

• Flexibility: Tokenization offers flexibility in data handling and integration. Tokens can be generated to match the format of the original data, facilitating seamless integration into existing systems without necessitating substantial changes to infrastructure or applications.

• Reduced Risk Exposure: Since tokenization involves the storage of tokens rather than actual sensitive data, the exposure of sensitive information in the event of a breach is minimized. This reduces the potential financial and reputational damage associated with data breaches.

Hashing Benefits:

• Data Integrity Assurance: Hashing ensures data integrity by generating unique hash values for input data. These hash values serve as digital fingerprints, enabling organizations to verify the integrity of data during transmission, storage, or retrieval processes.

• Password Security: Hashing is commonly used to secure passwords in databases. By storing hashed passwords instead of plaintext, organizations can mitigate the risk of unauthorized access in the event of a data breach. Even if the hashed passwords are compromised, they cannot be reversed to obtain the original passwords easily.

• Efficiency: Hash functions are computationally efficient, enabling quick verification of data integrity and passwords. This efficiency contributes to faster processing times and improved system performance, particularly in environments where large volumes of data need to be processed.

• Scalability: Hashing is inherently scalable, allowing organizations to handle increasing volumes of data without compromising performance. As data grows, hash functions can efficiently generate unique hash values, ensuring consistent data integrity verification and password security measures.

The Future of Tokenization and Hashing

Tokenization and hashing have emerged as indispensable tools in the arsenal of data security measures, and their importance is poised to grow even further in the coming years. Here's a look at the future trends for both techniques:

Tokenization:

Rapid Adoption Across Industries: 

The adoption of tokenization is expected to accelerate across various industries, driven by the increasing emphasis on data security and compliance. According to a report by MarketsandMarkets, the global tokenization market is projected to grow from $1.8 billion in 2020 to $4.8 billion by 2025, at a compound annual growth rate (CAGR) of 21.2%.

Expansion in Payment Processing: 

Tokenization is set to play a pivotal role in the evolution of payment processing systems. With the rise of digital payments and mobile wallets, the demand for secure transaction mechanisms is on the rise. By 2024, it is estimated that tokenization will handle over $30 trillion in online and in-store transactions, according to Juniper Research.

Integration with Emerging Technologies: 

Tokenization is expected to integrate with emerging technologies such as blockchain and Internet of Things (IoT) to enhance data security and privacy. These synergies will enable seamless and secure data exchange in decentralized environments.

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Hashing:

Continued Importance in Data Integrity Verification: 

Hashing will remain a critical component in ensuring data integrity across various domains, including financial services, healthcare, and supply chain management. As the volume and complexity of data continue to grow, the demand for reliable data verification mechanisms will increase.

Advancements in Cryptographic Algorithms: 

The evolution of cryptographic algorithms will drive advancements in hashing techniques, enabling stronger data security and resistance against emerging threats such as quantum computing. Organizations will leverage robust hashing algorithms to fortify their data protection strategies.

Integration with Artificial Intelligence (AI) and Machine Learning (ML): 

Hashing will find applications in AI and ML algorithms for data preprocessing and feature extraction. Hash functions will enable efficient data representation and similarity comparison, facilitating the development of more accurate and secure AI models.

How GCT Solution can help?

At GCT Solution, we understand the critical importance of data security. Our comprehensive suite of services include the most innovative security techniques to safeguard your sensitive information effectively. Whether you're a financial institution processing payments or an e-commerce platform handling customer data, our tailored solutions ensure compliance, mitigate risk, and enhance customer trust.

With GCT Solution, you can rest assured that your data is protected at every step of the process, from storage to transmission. Our team of experts works tirelessly to stay ahead of emerging threats and deliver cutting-edge security solutions tailored to your unique needs.

Final Thought:

If you are seeking a seasoned IT provider, GCT Solution is the ideal choice. With 3 years of expertise, we specialize in Mobile App , Web App, System Development, Blockchain Development and Testing Services. Our 100+ skilled IT consultants and developers can handle projects of any size. Having successfully delivered over 50+ solutions to clients worldwide, we are dedicated to supporting your goals. Reach out to us for a detailed discussion, confident that GCT Solution is poised to meet all your IT needs with tailored, efficient solutions.