Hashing vs. Encryption: Key Differences and Use Cases

Hashing and encryption are distinct cryptographic operations that serve fundamentally different purposes, yet they are routinely conflated in system design, compliance documentation, and security policy. This page maps the operational boundaries between the two mechanisms, identifies the regulatory contexts in which each applies, and provides structured guidance on when one approach is appropriate and the other is not. The distinction carries direct compliance consequences under frameworks including FIPS 140-3 and HIPAA.

Definition and scope

Hashing is a one-way mathematical transformation that converts input data of arbitrary length into a fixed-length output, called a digest or hash value. The operation is deterministic — identical inputs always produce identical outputs — but irreversible by design. No key is involved, and no mechanism exists within a properly constructed hash function to recover the original input from the digest alone.

Encryption is a reversible, key-dependent transformation. Plaintext is converted into ciphertext using an algorithm and a key; possession of the correct key (or key pair, in asymmetric schemes) allows recovery of the original plaintext. The reversibility is the defining characteristic that separates encryption from hashing at every level of system architecture. For a structured overview of encryption types and algorithms, including both symmetric and asymmetric variants, the classification boundaries are well-documented in NIST SP 800-175B Rev 1, Guideline for Using Cryptographic Standards in the Federal Government.

Hash functions fall into two broad categories:

1. Cryptographic hash functions — designed for security applications; examples include SHA-256 and SHA-3, standardized by NIST FIPS 180-4 and FIPS 202 respectively.
2. Non-cryptographic hash functions — designed for speed in data structures (e.g., hash tables); not suitable for security purposes due to absence of collision resistance guarantees.

Encryption algorithms divide into symmetric encryption (single shared key, e.g., AES-256) and asymmetric encryption (public/private key pairs, e.g., RSA-2048). Each variant carries distinct key management obligations described in NIST SP 800-57 Part 1 Rev 5.

How it works

Hashing — operational sequence:

1. Input data (a password, file, or message) is passed to the hash function.
2. The algorithm applies a series of bitwise operations, compression functions, and modular arithmetic across defined rounds — SHA-256 performs 64 rounds of processing.
3. A fixed-length digest is produced: 256 bits for SHA-256, 512 bits for SHA-512.
4. The digest is stored or transmitted. The original input is not retained for verification purposes — only the digest is compared against a newly computed hash of the candidate input.

Salting is a critical adjunct to hashing in password storage: a random value (the salt) is appended to the input before hashing, neutralizing precomputed rainbow table attacks. NIST SP 800-63B, the Digital Identity Guidelines for authentication, mandates salted hashing for stored memorized secrets using an approved algorithm such as PBKDF2, bcrypt, or Argon2.

Encryption — operational sequence:

1. A key (or key pair) is generated through a cryptographically secure process; key length requirements are defined per algorithm by NIST SP 800-131A Rev 2.
2. Plaintext is processed through the encryption algorithm in defined modes (e.g., AES in GCM mode for authenticated encryption).
3. Ciphertext is produced and transmitted or stored.
4. The authorized recipient applies the decryption key to recover plaintext.

The reversibility of encryption introduces key lifecycle management obligations — generation, distribution, rotation, and destruction — that hashing entirely avoids.

Common scenarios

Where hashing applies:

• Password storage — Systems store only the salted hash; at authentication, the candidate password is hashed and compared. No plaintext password is retained. This is the baseline expectation in PCI DSS Requirement 8 (PCI Security Standards Council, PCI DSS v4.0).
• File integrity verification — SHA-256 digests of software packages or firmware images allow detection of tampering or corruption without requiring the original file to be transmitted alongside the digest.
• Digital signatures — Hash functions are a component of digital signature schemes; the message is hashed, and the digest — not the full message — is signed with a private key, per FIPS 186-5.
• Message authentication codes (MACs) — HMAC combines a hash function with a secret key to authenticate message integrity.

Where encryption applies:

• Data in transit — TLS protocols use symmetric session keys negotiated via asymmetric key exchange to encrypt network traffic.
• Data at rest — Storage volumes, database fields, and backup archives use encryption at rest to prevent unauthorized disclosure if physical media is accessed.
• Secure messaging and email — End-to-end encryption and email encryption standards protect message content from intermediary access.
• Healthcare records — HIPAA's Security Rule (45 CFR §164.312) references NIST guidance for encrypting electronic protected health information (ePHI) at rest and in transit.

Decision boundaries

The structural test for choosing between hashing and encryption resolves to a single question: must the original data be recoverable?

Three additional boundary conditions govern the decision in practice:

1. Compliance mandates for retrievability — HIPAA requires that ePHI be accessible to authorized personnel; hashing alone cannot satisfy this requirement for clinical records that must be read back in original form.
2. Tokenization as a third path — Where neither full encryption nor one-way hashing fits, tokenization substitutes a non-sensitive token for the original value, with the mapping held in a separate secure vault. PCI DSS explicitly recognizes tokenization as a scope-reduction mechanism.
3. Algorithm deprecation risk — MD5 and SHA-1 are deprecated for security use by NIST SP 800-131A Rev 2 due to demonstrated collision vulnerabilities. Systems relying on these functions for integrity verification face documented algorithm vulnerability exposure.

Hashing and encryption are not interchangeable controls. Applying a hash where encryption is required produces irretrievably lost data; applying encryption where hashing is required introduces unnecessary key management burden and potential for plaintext exposure.

References

• NIST SP 800-175B Rev 1 — Guideline for Using Cryptographic Standards in the Federal Government
• NIST FIPS 180-4 — Secure Hash Standard (SHS)
• NIST FIPS 202 — SHA-3 Standard
• NIST SP 800-57 Part 1 Rev 5 — Recommendation for Key Management
• NIST SP 800-63B — Digital Identity Guidelines: Authentication and Lifecycle Management
• NIST SP 800-131A Rev 2 — Transitioning the Use of Cryptographic Algorithms and Key Lengths
• NIST FIPS 186-5 — Digital Signature Standard (DSS)
• PCI Security Standards Council — PCI DSS v4.0
• HHS — HIPAA Security Rule, 45 CFR §164.312