How Does VPN Encryption Work? A Plain-Language Breakdown

Key Takeaways

• VPN encryption scrambles internet traffic so ISPs, hackers, and Wi-Fi owners see only unreadable data.
• The connection starts with an asymmetric handshake – public and private keys verify both sides before any data is sent.
• A temporary shared session key is created and used to encrypt all traffic for that session.
• Data is encrypted using AES-256 or ChaCha20, then wrapped in packets for transit across the internet.
• The VPN server decrypts and forwards the request, so the website sees the VPN server's IP address rather than the user's.

What Is VPN Encryption?

VPN encryption converts readable internet traffic into unreadable code. Without it, an ISP, a Wi-Fi provider, or anyone monitoring the network can see which sites a device visits and what data it sends. 

A VPN prevents this by wrapping traffic in a mathematically locked tunnel. Only the VPN server, holding a key both sides agreed on in advance, can open it.

How VPN Encryption Works: Step by Step

VPN encryption happens in three stages, every time a connection is made. Each stage builds on the last – without the handshake there is no key, without the key there is no tunnel, and without the tunnel data travels in the open.

Step 1: The Handshake and Key Exchange

When a device connects to a VPN, it and the server first perform a handshake, which works roughly like an ID check at the door. Both sides use public and private key pairs to verify each other's identity. The device shares its public key, the server shares its own, and neither sends its private key anywhere. 

This is asymmetric cryptography: a public key can be handed out freely without exposing the private key it belongs to.

Using those exchanged public keys, both sides independently derive the same temporary session key, called a shared secret. It is never transmitted across the network. Each side calculates it separately and arrives at the same result, which is why intercepting the handshake doesn’t hand an eavesdropper the key. That shared secret encrypts and decrypts every packet for the rest of the session.

Step 2: The Encrypted Tunnel

With the session key agreed, the VPN app takes ordinary readable traffic – plaintext – and encrypts it with a fast symmetric cipher. Most VPNs use either AES-256 or ChaCha20. AES-256 is the most widely deployed standard in the world.

ChaCha20 encryption is what the WireGuard protocol uses, and it runs faster on mobile devices and other hardware without dedicated AES acceleration built into the chip. The output either way is ciphertext: meaningless without the session key.

That ciphertext does not travel on its own. It is wrapped inside standard outer internet packets so it can move across the public network like any other traffic – a sealed envelope inside an ordinary addressed package. Anyone intercepting those packets sees the outer addressing and nothing else. This wrapping step is called encapsulation.

Step 3: Arrival, Decryption, and the Return Trip

The encrypted packets arrive at the remote VPN server, which holds the same shared session key established during the handshake. The server uses that key to decrypt the request and read it, then forwards the clean request on to the target website. What the website records is the VPN server's IP address and location, not the IP address of the device that made the request.

The response travels back the same way in reverse. The website sends its reply to the VPN server, the server encrypts it with the session key, and it returns across the tunnel. The VPN app decrypts it and hands readable content to the browser, in milliseconds, for every request in a session.

AES-256 vs ChaCha20 – Which Encryption Does Your VPN Use?

Two ciphers dominate VPN encryption, and both are cryptographically secure. AES-256 is used by most commercial VPNs, banks, and government systems, and it is very fast on processors with hardware AES acceleration, which covers most modern Intel and AMD desktop chips. 

ChaCha20 is the cipher used by the WireGuard protocol, and it was designed to be fast in software, which makes it the stronger performer on phones, tablets, and routers. Neither choice represents a security compromise – the difference is which hardware each one suits.

What Mysterium VPN Uses

Mysterium VPN uses WireGuard as its default protocol, which means connections are encrypted with ChaCha20-Poly1305 – ChaCha20 handling the encryption and Poly1305 verifying that packets arrive unaltered. 

OpenVPN is also supported on Windows, Mac, iOS, and Linux for networks where WireGuard is blocked, and the trade-offs between the two are covered in this WireGuard vs OpenVPN comparison. Encryption is only one layer of the picture, though, and how Mysterium VPN works covers the routing side as well.

Readers who want it running on 15 devices at once can get Mysterium VPN from $2.99/mo.

What VPN Encryption Doesn't Protect You From

Encryption protects data in transit. It doesn’t do anything about the three failure modes that sit outside the tunnel.

• Malware and phishing: An encrypted connection to a malicious site is still a connection to a malicious site. Encryption protects the channel, not the destination, and a credential typed into a convincing fake login page travels through the tunnel perfectly securely.
• Accounts and cookies: Signing in to an account identifies a user regardless of which IP address the traffic arrives from. Tracking cookies and browser fingerprinting work the same way, which is why encryption alone does not deliver anonymity.
• Traffic that leaves the tunnel: Anything routed outside the VPN is unencrypted by definition, whether because the connection dropped or because split tunneling was configured to exclude certain apps. A kill switch exists to close the first of those gaps.