There's no network involved. More details here: 
http://greetingsfromoakland.blogspot.com/2008/11/zen-and-art-of-localconnection.html

You need to worry about encryption in this scenario unless you're worried about 
other processes on the local machine trolling randomly through memory...
What you likely do need to worry about are the gotchas mentioned in the blog 
post.

Best,
Seth

From: [email protected] [mailto:[email protected]] On Behalf 
Of Pete Appleby
Sent: Wednesday, January 28, 2009 2:45 PM
To: [email protected]
Subject: [flexcoders] Re: localconnection data encrypted?

It would seem that there is a network connection being used, but I
have not been able to find out for sure.

The localconnection allows different versions of the Flash player to
communicate via AMF0. This leads me to believe that the network is
being used as opposed to a shared memory model. It would be nice to
know for sure, but it is now a moot point for my applications.

I have taken the time to implement RSA encryption in my communication
classes so that the two AIR applications exchange public keys at the
time of the first Send command.

Once the handshaking of public keys has been completed, the future
messages are encrypted and pushed out through the use of the Send method. 

The receiving app then decrypts the message using its private keys. I
am storing the keys in the encrypted local store. That brings up the
question of just how secure is the encrypted local store?

Pete 

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