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What is encryption?
Encryption turns readable data into scrambled text, called ciphertext, that only someone with the right key can turn back. In crypto it protects things kept privately, such as a wallet file or backup, while Bitcoin and Ethereum transactions themselves are signed, not encrypted, and are public.
What it means for you
A wallet password usually encrypts the key stored on your device; it is not the key. Forget the password and the seed phrase can still restore the wallet; keep only an encrypted file without the seed phrase, and the password becomes the only way back. Anyone who copies that file can try guessing a weak password offline, without limits.
A common mistake: “My coins are encrypted on the blockchain, so nobody can see my balance.”
In fact: Bitcoin and Ethereum record balances and transfers openly. Anyone who knows an address can look up its history in a block explorer; signatures prove approval but hide nothing.
How it works
NIST defines encryption as the cryptographic transformation of data to produce ciphertext; decryption reverses it with the right key. Symmetric algorithms such as AES use a single key to both encrypt and decrypt, and NIST expects these to remain in use through the post-quantum transition because they are less vulnerable to quantum attack. Encryption is a different job from signing. A digital signature gives integrity and authenticity but not confidentiality, so a signed Bitcoin or Ethereum transaction, with its amounts and addresses, is readable by anyone.
Sources: NIST CSRC glossary: encryption, NIST IR 8547 (initial public draft): Transition to Post-Quantum Cryptography Standards, NIST CSRC glossary: digital signature · checked 4 October 2026
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