Doing it in memory is by far the easiest thing. It is also simple with one line calls to decrypt/encrypt and compress/decompress. This uses Crypt::Blowfish but you could use your favourite block cipher. The order is VITAL. plaintext->compress->crypt->file is the only way to go (reverse on the way out of course).

By definition a decent encryption algorithm will turn '0'x1000000 into random (and thus totally uncompressable noise). On the other hand a compression algorithm will compress the hell out of the plaintext due to the repeated pattern. Then you can crypt that. For interest reverse the order of crypt<->compress and you will see no compression at all. This is a simple measure of the quality of the encryption - the compression algorithm can no longer see any patterns (and we know the plaintext has patterns). Crap encryption WILL compress. Try ROT13, or bongo crypt ;-)

$|++;
use Compress::Zlib ;
use Crypt::CBC;
my $cipher = Crypt::CBC->new( {'key' => 'secret key', 'cipher' => 'Blo
+wfish',  });
my $file = 'c:/text.txt';

write_file( $file, $cipher, "abcbefghijklmnopqrstuvwxyz\n"x1000 );
print "\n\nDecrypting and decompressing\n\n";
my $data = read_file( $file, $cipher );
printf "Got back %d bytes\n%s\n[snip]", length($data), substr($data,0,
+64);

sub write_file {
    my ( $file, $cipher, $data ) = @_;
    printf "Before compression %d bytes\n", length($data);
    $data = compress($data);
    printf "After compression %d bytes\n", length($data);
    $data = $cipher->encrypt($data);
    printf "After encryption %d bytes\n", length($data);
    open my $fh, '>', $file or die $!;
    print $fh $data;
    close $fh;
    print map{ s/[^\040-\177]//g;$_ }$data;
}

sub read_file {
    my ( $file, $cipher ) = @_;
    open my $fh, $file or die $!;
    local $/;
    my $data = <$fh>;
    close $fh;
    $data = $cipher->decrypt($data);
    $data = uncompress($data);
  return $data;
}
__DATA__
Before compression 27000 bytes
After compression 116 bytes
After encryption 136 bytes
RandomIV#vTP;\\-Ij{Et@t--sC7SWy{<6P~)}y9p6_r$0bB(d1$k8:6,

Decrypting and decompressing

Got back 27000 bytes
abcbefghijklmnopqrstuvwxyz
abcbefghijklmnopqrstuvwxyz
abcbefghij
[snip]
[download]

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