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I've just been reading about a new drop-in replacement for the RC4 stream cipher, but why develop new stream ciphers when AES can be made into a stream with a little XORing?

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The biggest reason is performance. Stream ciphers are generally faster than block ciphers and perform fewer operations. Stream ciphers only need to generate a pseudorandom output while block ciphers need to be pseudorandom permutations. So when you create a steam cipher out of a block cipher, you are doing a lot more work to get the same effect. To get an idea, look at how much more work is required to encrypt 16 bytes with AES than RC4.

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    $\begingroup$ Comparing dissimilar ciphers like AES and RC4 is pretty difficult. On large modern CPUs AES will be much faster. $\endgroup$ – CodesInChaos Oct 30 '14 at 19:11
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    $\begingroup$ On small modern CPUs for embedded systems, RC4 will be hilariously faster $\endgroup$ – Richie Frame Oct 30 '14 at 20:53
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    $\begingroup$ @CodesInChaos: Only with the special instructions - AES-NI. $\endgroup$ – Nova Oct 30 '14 at 21:33

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