diff --git a/internal/api/syncapi/tunnel/aes.go b/internal/api/syncapi/tunnel/aes.go
new file mode 100644
index 00000000..7c944483
--- /dev/null
+++ b/internal/api/syncapi/tunnel/aes.go
@@ -0,0 +1,107 @@
+package tunnel
+
+import (
+	"crypto/aes"
+	"crypto/cipher"
+	"crypto/rand"
+	"errors"
+	"io"
+	"sync"
+)
+
+type crypt struct {
+	secret []byte
+	block  cipher.Block
+	once   sync.Once
+	err    error
+}
+
+func newCrypt(secret []byte) *crypt {
+	return &crypt{secret: secret}
+}
+
+func (c *crypt) init() {
+	c.block, c.err = aes.NewCipher(c.secret)
+}
+
+// pkcs5Padding adds PKCS#5 padding to the data
+func pkcs5Padding(data []byte, blockSize int) []byte {
+	padding := blockSize - len(data)%blockSize
+	padtext := make([]byte, padding)
+	for i := range padtext {
+		padtext[i] = byte(padding)
+	}
+	return append(data, padtext...)
+}
+
+// pkcs5Unpadding removes PKCS#5 padding from the data
+func pkcs5Unpadding(data []byte) ([]byte, error) {
+	if len(data) == 0 {
+		return nil, errors.New("data is empty")
+	}
+
+	padding := int(data[len(data)-1])
+	if padding > len(data) || padding == 0 {
+		return nil, errors.New("invalid padding")
+	}
+
+	// Check that all padding bytes are correct
+	for i := len(data) - padding; i < len(data); i++ {
+		if data[i] != byte(padding) {
+			return nil, errors.New("invalid padding")
+		}
+	}
+
+	return data[:len(data)-padding], nil
+}
+
+func (c *crypt) Encrypt(data []byte) ([]byte, error) {
+	c.once.Do(c.init)
+	if c.err != nil {
+		return nil, c.err
+	}
+
+	// Add PKCS#5 padding
+	paddedData := pkcs5Padding(data, aes.BlockSize)
+
+	// Create a random IV
+	ciphertext := make([]byte, aes.BlockSize+len(paddedData))
+	iv := ciphertext[:aes.BlockSize]
+	if _, err := io.ReadFull(rand.Reader, iv); err != nil {
+		return nil, err
+	}
+
+	// Encrypt the data
+	mode := cipher.NewCBCEncrypter(c.block, iv)
+	mode.CryptBlocks(ciphertext[aes.BlockSize:], paddedData)
+
+	return ciphertext, nil
+}
+
+func (c *crypt) Decrypt(data []byte) ([]byte, error) {
+	if len(data) < aes.BlockSize {
+		return nil, errors.New("ciphertext too short")
+	}
+
+	c.once.Do(c.init)
+	if c.err != nil {
+		return nil, c.err
+	}
+
+	// Extract IV and ciphertext
+	iv := data[:aes.BlockSize]
+	ciphertext := data[aes.BlockSize:]
+
+	// Check that ciphertext is a multiple of block size
+	if len(ciphertext)%aes.BlockSize != 0 {
+		return nil, errors.New("ciphertext is not a multiple of the block size")
+	}
+
+	// Decrypt the data
+	mode := cipher.NewCBCDecrypter(c.block, iv)
+	plaintext := make([]byte, len(ciphertext))
+	mode.CryptBlocks(plaintext, ciphertext)
+
+	// Remove PKCS#5 padding
+	return pkcs5Unpadding(plaintext)
+}
diff --git a/internal/api/syncapi/tunnel/aes_test.go b/internal/api/syncapi/tunnel/aes_test.go
new file mode 100644
index 00000000..96a97e9d
--- /dev/null
+++ b/internal/api/syncapi/tunnel/aes_test.go
@@ -0,0 +1,338 @@
+package tunnel
+
+import (
+	"bytes"
+	"crypto/rand"
+	"testing"
+)
+
+func TestNewCrypt(t *testing.T) {
+	secret := []byte("test-secret-key-")
+	c := newCrypt(secret)
+
+	if c == nil {
+		t.Fatal("newCrypt returned nil")
+	}
+
+	if !bytes.Equal(c.secret, secret) {
+		t.Errorf("expected secret %v, got %v", secret, c.secret)
+	}
+}
+
+func TestPKCS5Padding(t *testing.T) {
+	tests := []struct {
+		name      string
+		data      []byte
+		blockSize int
+		expected  int // expected length after padding
+	}{
+		{
+			name:      "empty data",
+			data:      []byte{},
+			blockSize: 16,
+			expected:  16,
+		},
+		{
+			name:      "data length equals block size",
+			data:      make([]byte, 16),
+			blockSize: 16,
+			expected:  32,
+		},
+		{
+			name:      "data length less than block size",
+			data:      []byte("hello"),
+			blockSize: 16,
+			expected:  16,
+		},
+		{
+			name:      "data length greater than block size",
+			data:      make([]byte, 20),
+			blockSize: 16,
+			expected:  32,
+		},
+	}
+
+	for _, tt := range tests {
+		t.Run(tt.name, func(t *testing.T) {
+			padded := pkcs5Padding(tt.data, tt.blockSize)
+
+			if len(padded) != tt.expected {
+				t.Errorf("expected length %d, got %d", tt.expected, len(padded))
+			}
+
+			// Check that padding is correct
+			paddingLen := tt.blockSize - (len(tt.data) % tt.blockSize)
+			for i := len(tt.data); i < len(padded); i++ {
+				if padded[i] != byte(paddingLen) {
+					t.Errorf("invalid padding byte at position %d: expected %d, got %d", i, paddingLen, padded[i])
+				}
+			}
+		})
+	}
+}
+
+func TestPKCS5Unpadding(t *testing.T) {
+	tests := []struct {
+		name      string
+		data      []byte
+		expectErr bool
+		expected  []byte
+	}{
+		{
+			name:      "valid padding",
+			data:      []byte{1, 2, 3, 4, 5, 5, 5, 5, 5},
+			expectErr: false,
+			expected:  []byte{1, 2, 3, 4},
+		},
+		{
+			name:      "full block padding",
+			data:      []byte{16, 16, 16, 16, 16, 16, 16, 16, 16, 16, 16, 16, 16, 16, 16, 16},
+			expectErr: false,
+			expected:  []byte{},
+		},
+		{
+			name:      "empty data",
+			data:      []byte{},
+			expectErr: true,
+			expected:  nil,
+		},
+		{
+			name:      "zero padding",
+			data:      []byte{1, 2, 3, 0},
+			expectErr: true,
+			expected:  nil,
+		},
+		{
+			name:      "invalid padding length",
+			data:      []byte{1, 2, 3, 10},
+			expectErr: true,
+			expected:  nil,
+		},
+		{
+			name:      "inconsistent padding",
+			data:      []byte{1, 2, 3, 3, 2},
+			expectErr: true,
+			expected:  nil,
+		},
+	}
+
+	for _, tt := range tests {
+		t.Run(tt.name, func(t *testing.T) {
+			result, err := pkcs5Unpadding(tt.data)
+
+			if tt.expectErr {
+				if err == nil {
+					t.Error("expected error but got none")
+				}
+			} else {
+				if err != nil {
+					t.Errorf("unexpected error: %v", err)
+				}
+				if !bytes.Equal(result, tt.expected) {
+					t.Errorf("expected %v, got %v", tt.expected, result)
+				}
+			}
+		})
+	}
+}
+
+func TestEncryptDecrypt(t *testing.T) {
+	secret := []byte("my-secret-key...")
+	c := newCrypt(secret)
+
+	tests := []struct {
+		name string
+		data []byte
+	}{
+		{
+			name: "empty data",
+			data: []byte{},
+		},
+		{
+			name: "short data",
+			data: []byte("hello"),
+		},
+		{
+			name: "data equal to block size",
+			data: make([]byte, 16),
+		},
+		{
+			name: "data larger than block size",
+			data: []byte("this is a longer message that spans multiple blocks"),
+		},
+		{
+			name: "binary data",
+			data: []byte{0, 1, 2, 3, 255, 254, 253, 252},
+		},
+		{
+			name: "large data",
+			data: make([]byte, 1024),
+		},
+	}
+
+	for _, tt := range tests {
+		t.Run(tt.name, func(t *testing.T) {
+			// Fill large data with random bytes
+			if len(tt.data) == 1024 {
+				rand.Read(tt.data)
+			}
+
+			// Encrypt
+			encrypted, err := c.Encrypt(tt.data)
+			if err != nil {
+				t.Fatalf("encryption failed: %v", err)
+			}
+
+			// Verify encrypted data is different from original (unless original is empty)
+			if len(tt.data) > 0 && bytes.Equal(encrypted, tt.data) {
+				t.Error("encrypted data is same as original")
+			}
+
+			// Verify encrypted data includes IV (at least block size)
+			if len(encrypted) < 16 {
+				t.Errorf("encrypted data too short: %d bytes", len(encrypted))
+			}
+
+			// Decrypt
+			decrypted, err := c.Decrypt(encrypted)
+			if err != nil {
+				t.Fatalf("decryption failed: %v", err)
+			}
+
+			// Verify decrypted matches original
+			if !bytes.Equal(decrypted, tt.data) {
+				t.Errorf("decrypted data doesn't match original.\nOriginal:  %v\nDecrypted: %v", tt.data, decrypted)
+			}
+		})
+	}
+}
+
+func TestEncryptionIsRandomized(t *testing.T) {
+	secret := []byte("test-secret.....")
+	c := newCrypt(secret)
+	data := []byte("same data every time")
+
+	// Encrypt the same data multiple times
+	encrypted1, err := c.Encrypt(data)
+	if err != nil {
+		t.Fatalf("encryption 1 failed: %v", err)
+	}
+
+	encrypted2, err := c.Encrypt(data)
+	if err != nil {
+		t.Fatalf("encryption 2 failed: %v", err)
+	}
+
+	// Encrypted results should be different due to random IV
+	if bytes.Equal(encrypted1, encrypted2) {
+		t.Error("encryption is not randomized - same input produced same output")
+	}
+
+	// But both should decrypt to the same original data
+	decrypted1, err := c.Decrypt(encrypted1)
+	if err != nil {
+		t.Fatalf("decryption 1 failed: %v", err)
+	}
+
+	decrypted2, err := c.Decrypt(encrypted2)
+	if err != nil {
+		t.Fatalf("decryption 2 failed: %v", err)
+	}
+
+	if !bytes.Equal(decrypted1, data) || !bytes.Equal(decrypted2, data) {
+		t.Error("decryption failed to recover original data")
+	}
+}
+
+func TestDecryptInvalidData(t *testing.T) {
+	secret := []byte("test-secret.....")
+	c := newCrypt(secret)
+
+	tests := []struct {
+		name string
+		data []byte
+	}{
+		{
+			name: "too short",
+			data: []byte("short"),
+		},
+		{
+			name: "not multiple of block size",
+			data: make([]byte, 17), // 16 + 1
+		},
+		{
+			name: "corrupted padding",
+			data: func() []byte {
+				// Create valid encrypted data then corrupt it
+				original := []byte("test data")
+				encrypted, _ := c.Encrypt(original)
+				// Corrupt the last byte (padding)
+				encrypted[len(encrypted)-1] = 255
+				return encrypted
+			}(),
+		},
+	}
+
+	for _, tt := range tests {
+		t.Run(tt.name, func(t *testing.T) {
+			_, err := c.Decrypt(tt.data)
+			if err == nil {
+				t.Error("expected decryption to fail but it succeeded")
+			}
+		})
+	}
+}
+
+func TestDifferentSecretsCannotDecrypt(t *testing.T) {
+	data := []byte("secret message")
+
+	c1 := newCrypt([]byte("secret1........."))
+	c2 := newCrypt([]byte("secret2........."))
+
+	// Encrypt with first secret
+	encrypted, err := c1.Encrypt(data)
+	if err != nil {
+		t.Fatalf("encryption failed: %v", err)
+	}
+
+	// Try to decrypt with second secret
+	_, err = c2.Decrypt(encrypted)
+	if err == nil {
+		t.Error("decryption with wrong secret should fail")
+	}
+}
+
+func BenchmarkEncrypt(b *testing.B) {
+	secret := []byte("benchmark-secret")
+	c := newCrypt(secret)
+	data := make([]byte, 1024)
+	rand.Read(data)
+
+	b.ResetTimer()
+	for i := 0; i < b.N; i++ {
+		_, err := c.Encrypt(data)
+		if err != nil {
+			b.Fatal(err)
+		}
+	}
+}
+
+func BenchmarkDecrypt(b *testing.B) {
+	secret := []byte("benchmark-secret")
+	c := newCrypt(secret)
+	data := make([]byte, 1024)
+	rand.Read(data)
+
+	encrypted, err := c.Encrypt(data)
+	if err != nil {
+		b.Fatal(err)
+	}
+
+	b.ResetTimer()
+	for i := 0; i < b.N; i++ {
+		_, err := c.Decrypt(encrypted)
+		if err != nil {
+			b.Fatal(err)
+		}
+	}
+}
diff --git a/internal/api/syncapi/tunnel/connstate.go b/internal/api/syncapi/tunnel/connstate.go
index 4f9c1df9..c52f4e9b 100644
--- a/internal/api/syncapi/tunnel/connstate.go
+++ b/internal/api/syncapi/tunnel/connstate.go
@@ -1,6 +1,7 @@
 package tunnel
 
 import (
+	"bytes"
 	"fmt"
 	"net"
 	"os"
@@ -8,7 +9,7 @@ import (
 	"sync/atomic"
 	"time"
 
-	v1 "github.com/garethgeorge/backrest/gen/go/v1"
+	"github.com/garethgeorge/backrest/gen/go/v1sync"
 	"go.uber.org/zap"
 )
 
@@ -35,15 +36,21 @@ type connState struct {
 
 var _ net.Conn = (*connState)(nil)
 
-func newConnState(stream stream, connId int64, logger *zap.Logger) *connState {
+func newConnState(streamm stream, connId int64, secret []byte, logger *zap.Logger) *connState {
 	if logger != nil {
 		logger = logger.Named("connState").With(
 			zap.Int64("connId", connId))
 	}
+
+	var s stream = streamm
+	// if len(secret) > 0 {
+	// 	s = newCryptedStream(streamm, secret)
+	// }
+
 	return &connState{
 		connId: connId,
 		seqno:  0,
-		stream: stream,
+		stream: s,
 		logger: logger,
 
 		closedCh: make(chan struct{}),
@@ -65,7 +72,7 @@ func (c *connState) sendOpenPacket() error {
 		c.logger.Info("sending open packet")
 	}
 
-	return c.stream.Send(&v1.TunnelMessage{
+	return c.stream.Send(&v1sync.TunnelMessage{
 		ConnId: c.connId,
 		Seqno:  0, // Open packet has Seqno 0
 	})
@@ -82,9 +89,9 @@ func (c *connState) Write(data []byte) (int, error) {
 	if c.logger != nil {
 		c.logger.Debug("writing data", zap.Int("dataLength", len(data)), zap.Int64("seqno", c.seqno))
 	}
-	err := c.stream.Send(&v1.TunnelMessage{
+	err := c.stream.Send(&v1sync.TunnelMessage{
 		ConnId: c.connId,
-		Data:   data,
+		Data:   bytes.Clone(data),
 		Seqno:  c.nextWriteSeqno,
 	})
 	if err != nil {
@@ -142,7 +149,7 @@ func (c *connState) Close() error {
 			c.logger.Info("closing connection")
 		}
 		close(c.closedCh)
-		if err := c.stream.Send(&v1.TunnelMessage{
+		if err := c.stream.Send(&v1sync.TunnelMessage{
 			ConnId: c.connId,
 			Close:  true,
 		}); err != nil {
diff --git a/internal/api/syncapi/tunnel/streamutil.go b/internal/api/syncapi/tunnel/streamutil.go
index dda632b8..e7d4394f 100644
--- a/internal/api/syncapi/tunnel/streamutil.go
+++ b/internal/api/syncapi/tunnel/streamutil.go
@@ -2,30 +2,82 @@ package tunnel
 
 import (
 	"errors"
+	"fmt"
 	"sync"
 	"sync/atomic"
 
 	"connectrpc.com/connect"
-	v1 "github.com/garethgeorge/backrest/gen/go/v1"
+	"github.com/garethgeorge/backrest/gen/go/v1sync"
 	"github.com/hashicorp/go-multierror"
+	"google.golang.org/protobuf/proto"
 )
 
 var ErrStreamClosed = errors.New("stream closed")
 
 type stream interface {
-	Send(item *v1.TunnelMessage) error
-	Receive() (*v1.TunnelMessage, error)
+	Send(item *v1sync.TunnelMessage) error
+	Receive() (*v1sync.TunnelMessage, error)
 	Close() error
 }
 
+type cryptedStream struct {
+	stream
+	crypt
+}
+
+func newCryptedStream(s stream, secret []byte) *cryptedStream {
+	return &cryptedStream{
+		stream: s,
+		crypt: crypt{
+			secret: secret,
+		},
+	}
+}
+
+func (cs *cryptedStream) Send(item *v1sync.TunnelMessage) error {
+	if item.Data == nil {
+		return cs.stream.Send(item)
+	}
+	bytes, err := proto.Marshal(item)
+	if err != nil {
+		return err
+	}
+	enc, err := cs.Encrypt(bytes)
+	if err != nil {
+		return fmt.Errorf("encrypt: %w", err)
+	}
+	return cs.stream.Send(&v1sync.TunnelMessage{
+		Encrypted: enc,
+	})
+}
+
+func (cs *cryptedStream) Receive() (*v1sync.TunnelMessage, error) {
+	msg, err := cs.stream.Receive()
+	if err != nil {
+		return nil, err
+	}
+	dec, err := cs.Decrypt(msg.Encrypted)
+	if err != nil {
+		return nil, fmt.Errorf("decrypt: %w", err)
+	}
+	var tm v1sync.TunnelMessage
+	if err := proto.Unmarshal(dec, &tm); err != nil {
+		return nil, fmt.Errorf("unmarshal: %w", err)
+	}
+	if len(tm.Encrypted) != 0 {
+		return nil, fmt.Errorf("unexpected encrypted field in decrypted message")
+	}
+	return &tm, nil
+}
+
 type clientStream struct {
 	sendMu    sync.Mutex
 	receiveMu sync.Mutex
-	stream    *connect.BidiStreamForClient[v1.TunnelMessage, v1.TunnelMessage]
+	stream    *connect.BidiStreamForClient[v1sync.TunnelMessage, v1sync.TunnelMessage]
 	closed    atomic.Bool
 }
 
-func (s *clientStream) Send(item *v1.TunnelMessage) error {
+func (s *clientStream) Send(item *v1sync.TunnelMessage) error {
 	s.sendMu.Lock()
 	defer s.sendMu.Unlock()
 	if s.closed.Load() {
@@ -34,7 +86,7 @@ func (s *clientStream) Send(item *v1.TunnelMessage) error {
 	return s.stream.Send(item)
 }
 
-func (s *clientStream) Receive() (*v1.TunnelMessage, error) {
+func (s *clientStream) Receive() (*v1sync.TunnelMessage, error) {
 	s.receiveMu.Lock()
 	defer s.receiveMu.Unlock()
 	if s.closed.Load() {
@@ -64,11 +116,11 @@ func (s *clientStream) Close() error {
 type serverStream struct {
 	sendMu    sync.Mutex
 	receiveMu sync.Mutex
-	stream    *connect.BidiStream[v1.TunnelMessage, v1.TunnelMessage]
+	stream    *connect.BidiStream[v1sync.TunnelMessage, v1sync.TunnelMessage]
 	closed    atomic.Bool
 }
 
-func (s *serverStream) Send(item *v1.TunnelMessage) error {
+func (s *serverStream) Send(item *v1sync.TunnelMessage) error {
 	s.sendMu.Lock()
 	defer s.sendMu.Unlock()
 	if s.closed.Load() {
@@ -77,7 +129,7 @@ func (s *serverStream) Send(item *v1.TunnelMessage) error {
 	return s.stream.Send(item)
 }
 
-func (s *serverStream) Receive() (*v1.TunnelMessage, error) {
+func (s *serverStream) Receive() (*v1sync.TunnelMessage, error) {
 	s.receiveMu.Lock()
 	defer s.receiveMu.Unlock()
 	if s.closed.Load() {
diff --git a/internal/api/syncapi/tunnel/tunnel_test.go b/internal/api/syncapi/tunnel/tunnel_test.go
index 793b097c..b690ed35 100644
--- a/internal/api/syncapi/tunnel/tunnel_test.go
+++ b/internal/api/syncapi/tunnel/tunnel_test.go
@@ -10,8 +10,8 @@ import (
 	"time"
 
 	"connectrpc.com/connect"
-	v1 "github.com/garethgeorge/backrest/gen/go/v1"
-	"github.com/garethgeorge/backrest/gen/go/v1/v1connect"
+	"github.com/garethgeorge/backrest/gen/go/v1sync"
+	"github.com/garethgeorge/backrest/gen/go/v1sync/v1syncconnect"
 	"github.com/garethgeorge/backrest/internal/testutil"
 	"go.uber.org/zap"
 	"golang.org/x/net/http2"
@@ -33,9 +33,9 @@ type sampleHandler struct {
 	provider *ConnectionProvider
 }
 
-var _ v1connect.TunnelServiceHandler = (*sampleHandler)(nil)
+var _ v1syncconnect.TunnelServiceHandler = (*sampleHandler)(nil)
 
-func (sh *sampleHandler) Tunnel(ctx context.Context, stream *connect.BidiStream[v1.TunnelMessage, v1.TunnelMessage]) error {
+func (sh *sampleHandler) Tunnel(ctx context.Context, stream *connect.BidiStream[v1sync.TunnelMessage, v1sync.TunnelMessage]) error {
 	wrapped := NewWrappedStream(stream, WithLogger(sh.logger))
 	wrapped.ProvideConnectionsTo(sh.provider)
 	sh.streams = append(sh.streams, wrapped)
@@ -113,7 +113,7 @@ func TestConnect(t *testing.T) {
 
 	// Serve the sample handler
 	mux := http.NewServeMux()
-	mux.Handle(v1connect.NewTunnelServiceHandler(sampleHandler))
+	mux.Handle(v1syncconnect.NewTunnelServiceHandler(sampleHandler))
 	grpcServer := &http.Server{
 		Addr:    testutil.AllocOpenBindAddr(t),
 		Handler: h2c.NewHandler(mux, &http2.Server{}), // h2c is HTTP/2 without TLS for grpc-connect support.
@@ -121,7 +121,7 @@ func TestConnect(t *testing.T) {
 	listenAndServeForTest("gRPCServer", t, grpcServer)
 
 	// Create a client and connect to the server
-	client := v1connect.NewTunnelServiceClient(NewInsecureHttpClient(), "http://"+grpcServer.Addr)
+	client := v1syncconnect.NewTunnelServiceClient(NewInsecureHttpClient(), "http://"+grpcServer.Addr)
 	stream := client.Tunnel(ctx)
 	wrapped := NewWrappedStreamFromClient(stream, WithLogger(testutil.NewTestLogger(t).Named("client")))
 	go func() {
diff --git a/internal/api/syncapi/tunnel/wrappedstream.go b/internal/api/syncapi/tunnel/wrappedstream.go
index 5901b998..b8886275 100644
--- a/internal/api/syncapi/tunnel/wrappedstream.go
+++ b/internal/api/syncapi/tunnel/wrappedstream.go
@@ -11,7 +11,7 @@ import (
 	"time"
 
 	"connectrpc.com/connect"
-	v1 "github.com/garethgeorge/backrest/gen/go/v1"
+	"github.com/garethgeorge/backrest/gen/go/v1sync"
 	"go.uber.org/zap"
 )
 
@@ -46,6 +46,9 @@ type WrappedStream struct {
 
 	handlingPackets atomic.Bool
 	streamStopped   atomic.Bool
+
+	sharedSecretCh chan struct{}
+	sharedSecret   []byte
 }
 
 func newWrappedStreamInternal(stream stream, isClient bool, opts ...WrappedStreamOptions) *WrappedStream {
@@ -54,6 +57,7 @@ func newWrappedStreamInternal(stream stream, isClient bool, opts ...WrappedStrea
 		stream:            stream,
 		heartbeatInterval: 30 * time.Second,
 		conns:             make(map[int64]*connState),
+		sharedSecretCh:    make(chan struct{}),
 	}
 	for _, opt := range opts {
 		opt(ws)
@@ -66,13 +70,13 @@ func newWrappedStreamInternal(stream stream, isClient bool, opts ...WrappedStrea
 	return ws
 }
 
-func NewWrappedStream(stream *connect.BidiStream[v1.TunnelMessage, v1.TunnelMessage], opts ...WrappedStreamOptions) *WrappedStream {
+func NewWrappedStream(stream *connect.BidiStream[v1sync.TunnelMessage, v1sync.TunnelMessage], opts ...WrappedStreamOptions) *WrappedStream {
 	return newWrappedStreamInternal(&serverStream{
 		stream: stream,
 	}, false, opts...)
 }
 
-func NewWrappedStreamFromClient(stream *connect.BidiStreamForClient[v1.TunnelMessage, v1.TunnelMessage], opts ...WrappedStreamOptions) *WrappedStream {
+func NewWrappedStreamFromClient(stream *connect.BidiStreamForClient[v1sync.TunnelMessage, v1sync.TunnelMessage], opts ...WrappedStreamOptions) *WrappedStream {
 	return newWrappedStreamInternal(&clientStream{
 		stream: stream,
 	}, true, opts...)
@@ -82,6 +86,14 @@ func (ws *WrappedStream) allocConnID() int64 {
 	return ws.lastConnID.Add(2)
 }
 
+func (ws *WrappedStream) getSharedSecret() ([]byte, error) {
+	<-ws.sharedSecretCh
+	if ws.sharedSecret == nil {
+		return nil, fmt.Errorf("shared secret not available")
+	}
+	return ws.sharedSecret, nil
+}
+
 func (ws *WrappedStream) IsReady() bool {
 	return ws.handlingPackets.Load() && !ws.streamStopped.Load()
 }
@@ -91,8 +103,13 @@ func (ws *WrappedStream) Dial() (net.Conn, error) {
 		return nil, fmt.Errorf("cannot dial before handling packets")
 	}
 
+	secret, err := ws.getSharedSecret()
+	if err != nil {
+		return nil, fmt.Errorf("get shared secret: %w", err)
+	}
+
 	connID := ws.allocConnID()
-	new := newConnState(ws.stream, connID, ws.logger)
+	new := newConnState(ws.stream, connID, secret, ws.logger)
 	if err := new.sendOpenPacket(); err != nil {
 		return nil, fmt.Errorf("send open packet: %w", err)
 	}
@@ -106,7 +123,7 @@ func (ws *WrappedStream) ProvideConnectionsTo(provider *ConnectionProvider) {
 	ws.provider = provider
 }
 
-func (ws *WrappedStream) sendHeartbeats(ctx context.Context) {
+func (ws *WrappedStream) sendHeartbeats(ctx context.Context, stream stream) {
 	if ws.heartbeatInterval <= 0 || !ws.isClient {
 		return
 	}
@@ -122,7 +139,7 @@ func (ws *WrappedStream) sendHeartbeats(ctx context.Context) {
 			if ws.logger != nil {
 				ws.logger.Debug("sending heartbeat")
 			}
-			if err := ws.stream.Send(&v1.TunnelMessage{
+			if err := stream.Send(&v1sync.TunnelMessage{
 				ConnId: -1, // handshake packet
 			}); err != nil && ws.logger != nil {
 				ws.logger.Error("failed to send heartbeat", zap.Error(err))
@@ -148,13 +165,29 @@ func (ws *WrappedStream) HandlePackets(ctx context.Context) error {
 		return fmt.Errorf("generate key for handshake packet: %w", err)
 	}
 
-	if err := ws.stream.Send(&v1.TunnelMessage{
-		ConnId:           -100, // hadnshake packet
+	if err := ws.stream.Send(&v1sync.TunnelMessage{
+		ConnId:           -100, // handshake packet
 		PubkeyEcdhX25519: key.PublicKey().Bytes(),
 	}); err != nil {
 		return fmt.Errorf("send handshake packet: %w", err)
 	}
 
+	go func() {
+		timeoutTimer := time.NewTimer(5 * time.Second)
+		defer timeoutTimer.Stop()
+		select {
+		case <-timeoutTimer.C:
+			if ws.logger != nil {
+				ws.logger.Warn("timeout waiting for handshake response")
+			}
+			ws.Shutdown()
+		case <-ws.sharedSecretCh:
+			if ws.logger != nil {
+				ws.logger.Info("handshake response received, shared secret established")
+			}
+		}
+	}()
+
 	// receive handshake packet
 	handshake, err := ws.stream.Receive()
 	if err != nil {
@@ -170,18 +203,21 @@ func (ws *WrappedStream) HandlePackets(ctx context.Context) error {
 	if err != nil {
 		return fmt.Errorf("parse peer public key: %w", err)
 	}
-
-	_, err = key.ECDH(peerKey)
+	sharedSecret, err := key.ECDH(peerKey)
 	if err != nil {
 		return fmt.Errorf("compute shared key: %w", err)
 	}
-	// TODO: use the key for encryption and decryption of messages.
+	ws.sharedSecret = sharedSecret
+	close(ws.sharedSecretCh)
+
+	// cryptedStream := newCryptedStream(ws.stream, ws.sharedSecret)
+	cryptedStream := ws.stream
 
 	newConn := func(connId int64) *connState {
 		if ws.logger != nil {
 			ws.logger.Info("new tunnel connection", zap.Int64("connId", connId))
 		}
-		new := newConnState(ws.stream, connId, ws.logger)
+		new := newConnState(ws.stream, connId, ws.sharedSecret, ws.logger)
 		ws.conns[connId] = new
 		ws.provider.ProvideConn(new)
 		return new
@@ -191,10 +227,10 @@ func (ws *WrappedStream) HandlePackets(ctx context.Context) error {
 	defer headOfLineBlockingTimer.Stop()
 
 	// send heartbeats in a separate goroutine if heartbeat interval is set
-	go ws.sendHeartbeats(ctx)
+	go ws.sendHeartbeats(ctx, cryptedStream)
 
 	for {
-		msg, err := ws.stream.Receive()
+		msg, err := cryptedStream.Receive()
 		if err != nil {
 			if ws.handlingPackets.Load() {
 				return nil