<p>The Internet of Things (IoT) features highly useful devices and is thus highly popular. Countries and companies have increasingly started deploying numerous types of sensors for monitoring the environment. Similarly, smart grid systems have been increasingly equipped with IoT devices or sensors for data monitoring and transmission. A smart grid is based on an advanced metering infrastructure system and comprises meter data management systems, data concentrators, and smart meters. However, these IoT devices or sensors must request for or respond to messages or data frequently. This imposes a substantial burden on the network bandwidth, causing the network to crash or become blocked. To resolve this problem, this study proposes a differential encoding-based data compression algorithm for reducing the burden imposed on network bandwidth in smart grids. Furthermore, smart grid devices are marred by cybersecurity problems. In particular, as more power or utility organizations use such devices to monitor the status of their power systems and provide automatic billing to their customers, ensuring that the security of smart grid devices is imperative. Security measures should be implemented to ensure that all information is sent from authorized devices or clients. To address such security concerns, the proposed algorithm is equipped with a highly efficient elliptic curve digital signature algorithm to prevent man-in-the-middle and replay attacks. This study conducted an experiment to demonstrate the performance of the proposed algorithm; the algorithm was compared with existing algorithms. The experimental results revealed that the proposed algorithm outperformed these counterpart algorithms in terms of compression ratio (which was twice those of the counterpart algorithms) and computing speed.</p>