I have heard that a VPN encrypts your data but a proxy doesn't.
So a proxy that encrypts your data is the same thing as a VPN?
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A Virtual Private Network VPN works at the network layer, and you could use it to route any network traffic, while a proxy could be many things. E.g. a SOCKS proxy proxies TCP connections and an SSH tunnel could be used for similar purposes than a VPN, but you are more likely referring to a HTTP proxy, that forward HTTP request. Nevertheless, proxy with an encryption doesn't equal a VPN, and technically they are two very different things.