The traditional encryption method not only ensures the security of information, but also leads to the increase of data volume and the decrease of storage and transmission efficiency. Therefore, how to effectively improve the efficiency of data compression and transmission under the premise of ensuring data security is a major problem facing data processing at present. In order to solve this problem, this article plans to combine Huffman coding with data stream encryption and design a new encryption method based on Huffman coding to solve the problem of safe storage and effective transmission of data in the network. This article first introduces the basic principles and techniques of data stream encryption, which ensures the security of data during transmission by encrypting the data stream in real-time. Next, the compression mechanism of Huffman encoding was analyzed, which achieved data compression by using a variable length encoding table to perform shorter encoding on frequently occurring data. By combining these two technologies, the article has designed a collaborative module that seamlessly integrates encryption and compression processes without interfering with each other. When the Huffman factor increases from 0.5 to 2.0, the compression rate increases from approximately 50% to around 85%. This means that the compression effect of the file has been significantly improved. This study proposes a storage and transmission algorithm that combines data stream encryption and Huffman encoding compression. This not only ensures the security of data transmission, but also significantly improves data processing efficiency by optimizing compression mechanisms, for application scenarios that require simultaneous consideration of data security and efficiency.