Abstract: In this paper, the problem of transmitting redundant data over an insecure, bandwidth-constrained communications channel is discussed. A content owner encrypts the original uncompressed image using an encryption key. Then, a data-hider may compress the least significant bits of the encrypted image using a data-hiding key to create a sparse space to accommodate some additional data. Using data hiding key the receiver can extract additional data even the receiver has no information about the original image content. Using the decryption key the receiver can extract data to obtain an image similar to the original one, but cannot extract the additional data. If the receiver has both the data-hiding key and the encryption key, the receiver can extract the additional data and the original image without any loss.

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