Can Tokenization Be Hacked?

 Tokenization is an interesting area in the payment space. Most people associate tokenization with credit card fraud. And that’s true; it does play an important role in preventing fraud. However, tokenization is also used as an alternative to encryption for other kinds of data, including emails and files, making any potential hacks more difficult, not less so.

This brief article will explain the key concepts surrounding tokenization and blockchain security. We’ll explain the difference between tokenization and encryption and offer some insight into which is the more secure technology for safeguarding data and processing transactions. 

The difference between tokenization and encryption

Before we can answer the question of whether tokenization can be hacked, it’s important to understand what tokenization actually is and how it differs from encryption. Tokenization is a process for making sensitive data unreadable. In other words, it’s a form of data obfuscation or the replacement of sensitive information with an identifier known as a “token.” The token is essentially a substitute for the original sensitive data. 

It can be used in its place without compromising security because the original information has been permanently replaced by something that doesn’t give attackers any clues about what the sensitive data was actually like. Tokenization is different from methods such as encryption and hashing because it uses random bit strings instead of using algorithms to transform data.

Tokenization vs. encryption

In a nutshell, tokenization is safer than encryption for protecting sensitive data because it does not rely on keys that could potentially be hacked or stolen. It’s also more scalable to growing datasets, which is useful not only for credit card information but also for other types of personal data like health records and biometrics. However, while encryption can be done by the end-user, tokenization requires a vendor who will store the sensitive information in its original form. 

Tokenization does not rely on keys, making it less prone to hacking

Now that you know how the tokenization process works, it’s useful to know how tokenization is less prone to hacking than encryption. This is an advantage over encryption because even if hackers are able to gain access to a database containing tokens, they are unable to decipher the tokens into readable data unless they also have access to the cardholder’s information. 

A hacker would need both the encrypted data (the key) and the tokenized reference in order for either piece of information alone to be useful. If a hacker steals a database of tokens without having access to the key for decrypting them, then he or she is basically stealing data that is essentially useless, which is one reason why tokenization databases should be kept separate from other databases containing customer information.

Can blockchain technology get hacked?

Blockchain technology is a huge leap forward in terms of security compared with traditional systems, but it still isn’t 100% foolproof. There are still a number of ways that blockchain technology can be compromised. 

Since the network is distributed and there is no server that keeps all the information, it becomes very difficult for hackers to access it since the security measures are not centralized. However, this does not mean that blockchain technology is impenetrable. 

There have been cases where bitcoins have been stolen from various wallets, and despite the fact that there are protocols in place to prevent such actions from taking place, hackers have managed to bypass them.

Conclusion

In conclusion, tokenization provides a much more efficient way of securing data. We at BRET Real Estate tokenization are effectively tokenizing real estate. What this means is that real property is fractionalized into little pieces or shares that are then uploaded to the blockchain and turned into tokens. Tokens are more easily and securely stored than traditional securities thanks to electronic wallets, at the same time, they are more easily tradable than paper securities. 

A new way of investing in real estate opportunities is here thanks to blockchain and tokenization. What are you waiting for to start purchasing interest in U.S real estate from anywhere in the world? Learn more on this process on our website and/or keep tuned to our blog posts covering different aspects of tokenization and the blockchain space!

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