diff --git a/backend/.gitignore b/backend/.gitignore
index 0f331aa..1aedb1a 100644
--- a/backend/.gitignore
+++ b/backend/.gitignore
@@ -29,4 +29,5 @@ archive.zip
 # macOS
 .DS_Store
 
-.env
\ No newline at end of file
+.env
+data/
\ No newline at end of file
diff --git a/backend/encrypted-notes/__init__.py b/backend/README.md
similarity index 100%
rename from backend/encrypted-notes/__init__.py
rename to backend/README.md
diff --git a/backend/encrypted-notes/crypto.py b/backend/encrypted_notes/__init__.py
similarity index 100%
rename from backend/encrypted-notes/crypto.py
rename to backend/encrypted_notes/__init__.py
diff --git a/backend/encrypted_notes/crypto.py b/backend/encrypted_notes/crypto.py
new file mode 100644
index 0000000..3976fd1
--- /dev/null
+++ b/backend/encrypted_notes/crypto.py
@@ -0,0 +1,250 @@
+"""
+Secure encryption module for handling password-based encryption.
+
+This module provides functions for:
+- Generating secure salts
+- Deriving encryption keys from passwords using PBKDF2-HMAC-SHA256
+- Encrypting and decrypting data using Fernet (AES-128 in CBC mode)
+- Managing master keys for encryption
+"""
+
+import os
+from base64 import urlsafe_b64encode
+from pathlib import Path
+
+from cryptography.hazmat.primitives import hashes
+from cryptography.hazmat.primitives.kdf.pbkdf2 import PBKDF2HMAC
+from cryptography.fernet import Fernet, InvalidToken
+
+from .errors import KeyDerivationError, EncryptionError, DecryptionError
+
+DEFAULT_SALT_LENGTH = 16
+DEFAULT_ITERATIONS = 100_000
+MIN_ITERATIONS = 10_000
+KEY_LENGTH = 32  # 256 bits for AES-256
+
+
+def generate_salt(length: int = DEFAULT_SALT_LENGTH) -> bytes:
+    """
+    Generate a cryptographic salt.
+
+    Args:
+        length (int): Length of the salt in bytes. Default is 16 bytes.
+
+    Returns:
+        Random salt bytes
+
+    Raises:
+        ValueError: If length is less than 8 bytes.
+    """
+    if length <= 8:
+        raise ValueError("Salt length must be a positive integer.")
+
+    return os.urandom(length)
+
+
+def derive_key_from_password(
+    password: str, salt: bytes, iterations: int = DEFAULT_ITERATIONS
+) -> bytes:
+    """
+    Derive an encryption key from a password using PBKDF2-HMAC-SHA256.
+
+    Args:
+        password: User password
+        salt: Random salt for key derivation
+        iterations: Number of PBKDF2 iterations (default: 100,000)
+
+        Returns:
+            Derived key bytes
+
+        Raises:
+            ValueError: If password is empty or iterations < 10000
+            KeyDerivationError: If key derivation fails
+    """
+    if not password:
+        raise ValueError("Password cannot be empty")
+
+    if iterations < MIN_ITERATIONS:
+        raise ValueError(f"Iterations must be at least {MIN_ITERATIONS}")
+
+    try:
+        kdf = PBKDF2HMAC(
+            algorithm=hashes.SHA256(),
+            length=KEY_LENGTH,
+            salt=salt,
+            iterations=iterations,
+        )
+
+        key = kdf.derive(password.encode("utf-8"))
+        return urlsafe_b64encode(key)
+    except Exception as e:
+        raise KeyDerivationError(f"Failed to derive key: {e}") from e
+
+
+def encrypt_bytes(key: bytes, plaintext: bytes) -> bytes:
+    """
+    Encrypt plaintext bytes using Fernet (AES-128 in CBC mode).
+
+    Args:
+        key: Base64-encoded encryption key (from derive_key_from_password)
+        plaintext: Data to encrypt
+
+    Returns:
+        Encrypted token (includes IV and MAC)
+
+    Raises:
+        EncryptionError: If encryption fails
+        ValueError: If key format is invalid
+    """
+    if not plaintext:
+        raise ValueError("Plaintext cannot be empty")
+
+    try:
+        cipher = Fernet(key)
+        return cipher.encrypt(plaintext)
+    except ValueError as e:
+        raise ValueError(f"Invalid key format: {e}") from e
+    except Exception as e:
+        raise EncryptionError(f"Encryption failed: {e}") from e
+
+
+def decrypt_bytes(key: bytes, token: bytes) -> bytes:
+    """
+    Decrypt a Fernet token.
+
+    Args:
+        key: Base64-encoded encryption key (same as used for encryption)
+        token: Encrypted token to decrypt
+
+    Returns:
+        Decrypted plaintext bytes
+
+    Raises:
+        DecryptionError: If decryption fails (wrong key or corrupted data)
+        ValueError: If key format is invalid
+    """
+    if not token:
+        raise ValueError("Token cannot be empty")
+
+    try:
+        cipher = Fernet(key)
+        return cipher.decrypt(token)
+    except InvalidToken:
+        raise DecryptionError("Decryption failed: incorrect passowrd or corrupted data")
+    except ValueError as e:
+        raise ValueError(f"Invalid key format: {e}") from e
+    except Exception as e:
+        raise DecryptionError(f"Decryption failed: {e}") from e
+
+
+def encrypt_text(key: bytes, plaintext: str) -> bytes:
+    """
+    Encrypt a text string.
+
+    Args:
+        key: Base64-encoded encryption key
+        plaintext: Text to encrypt
+
+    Returns:
+        Encrypted token
+    """
+    return encrypt_bytes(key, plaintext.encode("utf-8"))
+
+
+def decrypt_text(key: bytes, token: bytes) -> str:
+    """
+    Decrypt a token to text string.
+
+    Args:
+        key: Base64-encoded encryption key
+        token: Encrypted token
+
+    Returns:
+        Decrypted text
+    """
+    plaintext_bytes = decrypt_bytes(key, token)
+    return plaintext_bytes.decode("utf-8")
+
+
+def generate_master_key() -> bytes:
+    """
+    Generate a random Fernet-compatible master key.
+
+    This can be used instead of password-based encryption for scenarios
+    where you want to generate and store a random key.
+
+    Returns:
+        Base64-encoded random key
+    """
+    return Fernet.generate_key()
+
+
+def save_master_key(key: bytes, filepath: Path | str) -> None:
+    """
+    Save a master key to a file with secure permissions.
+
+    Args:
+        key: Base64-encoded key to save
+        filepath: Path to save the key
+
+    Raises:
+        OSError: If file operations fail
+    """
+    filepath = Path(filepath)
+
+    filepath.parent.mkdir(parents=True, exist_ok=True)
+    filepath.write_bytes(key)
+
+    try:
+        os.chmod(filepath, 0o600)
+    except (AttributeError, OSError):
+        print(f"Warning: Could not set secure permissions on {filepath}")
+
+
+def load_master_key(filepath: Path | str) -> bytes:
+    """
+    Load a master key from a file.
+
+    Args:
+        filepath: Path to the key file
+
+    Returns:
+        Base64-encoded key
+
+    Raises:
+        FileNotFoundError: If key file doesn't exist
+        ValueError: If key format is invalid
+    """
+    filepath = Path(filepath)
+
+    if not filepath.exists():
+        raise FileNotFoundError(f"Key file not found: {filepath}")
+
+    key = filepath.read_bytes().strip()
+
+    try:
+        Fernet(key)
+    except Exception as e:
+        raise ValueError(f"Invalid key format in {filepath}: {e}") from e
+
+    return key
+
+
+def verify_password(password: str, salt: bytes, encrypted_data: bytes) -> bool:
+    """
+    Verify if a password is correct by attempting to decrypt data.
+
+    Args:
+        password: Password to verify
+        salt: Salt used for key derivation
+        encrypted_data: Sample encrypted data to test
+
+    Returns:
+        True if password is correct, False otherwise
+    """
+    try:
+        key = derive_key_from_password(password, salt)
+        decrypt_bytes(key, encrypted_data)
+        return True
+    except (DecryptionError, KeyDerivationError):
+        return False
diff --git a/backend/encrypted_notes/errors.py b/backend/encrypted_notes/errors.py
new file mode 100644
index 0000000..6ebf67d
--- /dev/null
+++ b/backend/encrypted_notes/errors.py
@@ -0,0 +1,16 @@
+class EncryptionError(Exception):
+    """Base class for encryption-related errors."""
+
+    pass
+
+
+class DecryptionError(EncryptionError):
+    """Raised when decryption fails."""
+
+    pass
+
+
+class KeyDerivationError(EncryptionError):
+    """Raised when key derivation fails."""
+
+    pass
diff --git a/backend/poetry.lock b/backend/poetry.lock
index a277d4e..383a119 100644
--- a/backend/poetry.lock
+++ b/backend/poetry.lock
@@ -1199,5 +1199,5 @@ test = ["covdefaults (>=2.3)", "coverage (>=7.2.7)", "coverage-enable-subprocess
 
 [metadata]
 lock-version = "2.1"
-python-versions = "^3.11"
-content-hash = "7b4f382ab273e7526b5551e6acd88c160f24bf063164730b071061d22237ba67"
+python-versions = ">=3.11"
+content-hash = "25fac6a06962f5cd4a60559ef58a61e6b9d5e41fa40a3011ed111d0c778a4362"
diff --git a/backend/pyproject.toml b/backend/pyproject.toml
index d031f54..863a8f7 100644
--- a/backend/pyproject.toml
+++ b/backend/pyproject.toml
@@ -7,7 +7,7 @@ authors = [
 ]
 license = {text = "Apache License 2.0"}
 readme = "README.md"
-requires-python = "^3.11"
+requires-python = ">=3.11"
 dependencies = [
     "fastapi (>=0.118.2,<0.119.0)",
     "uvicorn (>=0.37.0,<0.38.0)",
diff --git a/backend/tests/__init__.py b/backend/tests/__init__.py
new file mode 100644
index 0000000..e69de29
diff --git a/backend/tests/test_crypto.py b/backend/tests/test_crypto.py
index e69de29..139576d 100644
--- a/backend/tests/test_crypto.py
+++ b/backend/tests/test_crypto.py
@@ -0,0 +1,82 @@
+import pytest
+
+from encrypted_notes.crypto import (
+    generate_salt,
+    derive_key_from_password,
+    encrypt_bytes,
+    decrypt_bytes,
+    encrypt_text,
+    decrypt_text,
+    generate_master_key,
+    verify_password,
+    DEFAULT_SALT_LENGTH,
+)
+from encrypted_notes.errors import DecryptionError
+
+DEFAULT_PASSWORD = "securepassword"
+WRONG_PASSWORD = "wrongpassword"
+PLAINTEXT_BYTES = b"Sensitive data"
+PLAINTEXT_TEXT = "Sensitive text"
+INVALID_SALT_LENGTH = 4
+INVALID_ITERATIONS = 5000
+
+
+def test_generate_salt():
+    salt = generate_salt()
+    assert len(salt) == DEFAULT_SALT_LENGTH
+    assert isinstance(salt, bytes)
+
+    with pytest.raises(ValueError):
+        generate_salt(INVALID_SALT_LENGTH)
+
+
+def test_derive_key_from_password():
+    salt = generate_salt()
+    key = derive_key_from_password(DEFAULT_PASSWORD, salt)
+    assert isinstance(key, bytes)
+
+    with pytest.raises(ValueError):
+        derive_key_from_password("", salt)
+
+    with pytest.raises(ValueError):
+        derive_key_from_password(DEFAULT_PASSWORD, salt, iterations=INVALID_ITERATIONS)
+
+
+def test_encrypt_decrypt_bytes():
+    salt = generate_salt()
+    key = derive_key_from_password(DEFAULT_PASSWORD, salt)
+
+    encrypted = encrypt_bytes(key, PLAINTEXT_BYTES)
+    assert encrypted != PLAINTEXT_BYTES
+
+    decrypted = decrypt_bytes(key, encrypted)
+    assert decrypted == PLAINTEXT_BYTES
+
+    with pytest.raises(DecryptionError):
+        decrypt_bytes(generate_master_key(), encrypted)
+
+
+def test_encrypt_decrypt_text():
+    salt = generate_salt()
+    key = derive_key_from_password(DEFAULT_PASSWORD, salt)
+
+    encrypted = encrypt_text(key, PLAINTEXT_TEXT)
+    assert isinstance(encrypted, bytes)
+
+    decrypted = decrypt_text(key, encrypted)
+    assert decrypted == PLAINTEXT_TEXT
+
+
+def test_generate_master_key():
+    key = generate_master_key()
+    assert isinstance(key, bytes)
+    assert len(key) > 0
+
+
+def test_verify_password():
+    salt = generate_salt()
+    key = derive_key_from_password(DEFAULT_PASSWORD, salt)
+    encrypted = encrypt_bytes(key, PLAINTEXT_BYTES)
+
+    assert verify_password(DEFAULT_PASSWORD, salt, encrypted) is True
+    assert verify_password(WRONG_PASSWORD, salt, encrypted) is False