In recent years, several industries have increased their demand for processing precision, automatic detection, and visualization interfaces. Therefore, to keep pace with the Fourth Industrial Revolution, machine tool operators install a large number of sensors on machine tools to obtain more precise physical quantities during processing, and use a variety of sensors to obtain measurements in various situations. However, these additional sensors on machine tools result in complicated wire layouts, which exhibit negative effects on processing. Such problems lead to the birth of wireless data transmission, which is expected to become the new standard in the future. At present, there are more and more interactive integration between relevant embedded system and the machine tool, which allows information communication between each other in the wireless domain. However, generally, the majority of machine tool operators focus on optimizing the sensing conditions during processing, but they disregard the importance of information security. In the current era of the Internet of Things, information security is regarded as a crucial factor. For the wireless communication between the Internet of Things (IoT) equipment for each machine in the machining field, the transmitted data is almost exposed within public space directly due to the loss in constraint and protection of physical wiring. Therefore, such process can easily be intercepted by other devices that capture information on relevant status of the machine, or command messages received by the controller, where intentional individual may possibly control the operating mechanism and progress of entire plant. This leads to theft of relevant secrets in manufacturing technology for the subject company, or intentional shutdown, machine damage and vicious blackmailing attacks. Therefore, introducing the mechanism of safety protection during wireless signal transmission is an inevitable technology to maintain the company interests, and also the necessary study lacking at present. Within the encrypted algorithm under such category, the chaotic system has become the popular option of study based on its characteristic of difficulty in decryption. Therefore, in this study, a signal transmission encryption and decryption system to be used by sensory toolholders during processing was designed. The unpredictability of the chaotic system was utilized, and chaotic synchronization control was used to calculate the encryption and decryption of the key, rendering the key difficult to compromise. Two control methods of the synchronization process were then compared: sliding mode control and proportional-integral-derivative (PID) control. The parameters of the PID controller were calculated using optimization algorithms such as the genetic algorithm, hybrid Taguchi-genetic algorithm, and particle swarm optimization. The experimental results revealed that, compared with the PID control, the sliding mode control featured advantages such as fewer iterations required for synchronization, fewer errors after synchronization, and higher robustness and performance recovery. Thus, the sliding mode control synchronization system was able to generate more complex keys and had superior information security and system stability.