Conventional double random phase encoding (DRPE) encrypts plaintext to white noise-like ciphertext which may attract attention of eavesdroppers, and recent research reported that DRPE is vulnerable to various attacks. Here we propose a security enhanced optical encryption system that can hide the existence of secret information by watermarking. The plaintext is encrypted using iterative fractional Fourier transform with random phase key, and ciphertext is randomly permuted with permutation key before watermarking. Cryptanalysis shows that linearity of the security system has been broken and the permutation key prevent the attacker from accessing the ciphertext in various attacks. A series of simulations have shown the effectiveness of this system and the security strength is enhanced for invisibility, nonlinearity and resistance against attacks.
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