It is called onion routing because onions have layers and this networking protocol also has layers. In onion routing messages are encapsulated in several layers of encryption, analogous to encapsulation in the OSI 7 layer model. The core principle of Tor is “onion routing” which is a technique for anonymous communication over a public network. Tor is a circuit based low-latency anonymous communication service Here is a quote from the paper titled “Tor: The Second-Generation Onion Router” on what Tor is in a nutshell: The pre-alpha version of Tor was released to the public in September of 2002 and the Tor project, the company that maintains Tor, was started in 2006. The Onion Routing Protocol (TOR) was designed by the US Navy in the mid 1990s at the U.S Naval Research Labatory. I read the whitepaper so you don’t have to.
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