diff --git a/warzone/Cargo.lock b/warzone/Cargo.lock
index 46aa5da..6ed439e 100644
--- a/warzone/Cargo.lock
+++ b/warzone/Cargo.lock
@@ -2647,7 +2647,7 @@ dependencies = [
 
 [[package]]
 name = "warzone-client"
-version = "0.0.11"
+version = "0.0.12"
 dependencies = [
  "anyhow",
  "argon2",
@@ -2680,7 +2680,7 @@ dependencies = [
 
 [[package]]
 name = "warzone-mule"
-version = "0.0.11"
+version = "0.0.12"
 dependencies = [
  "anyhow",
  "clap",
@@ -2689,7 +2689,7 @@ dependencies = [
 
 [[package]]
 name = "warzone-protocol"
-version = "0.0.11"
+version = "0.0.12"
 dependencies = [
  "base64",
  "bincode",
@@ -2712,7 +2712,7 @@ dependencies = [
 
 [[package]]
 name = "warzone-server"
-version = "0.0.11"
+version = "0.0.12"
 dependencies = [
  "anyhow",
  "axum",
@@ -2739,7 +2739,7 @@ dependencies = [
 
 [[package]]
 name = "warzone-wasm"
-version = "0.0.11"
+version = "0.0.12"
 dependencies = [
  "base64",
  "bincode",
diff --git a/warzone/Cargo.toml b/warzone/Cargo.toml
index 22ccb03..1387dd2 100644
--- a/warzone/Cargo.toml
+++ b/warzone/Cargo.toml
@@ -9,7 +9,7 @@ members = [
 ]
 
 [workspace.package]
-version = "0.0.12"
+version = "0.0.13"
 edition = "2021"
 license = "MIT"
 rust-version = "1.75"
diff --git a/warzone/crates/warzone-client/src/cli/recv.rs b/warzone/crates/warzone-client/src/cli/recv.rs
index 0f98f04..528cd6e 100644
--- a/warzone/crates/warzone-client/src/cli/recv.rs
+++ b/warzone/crates/warzone-client/src/cli/recv.rs
@@ -123,6 +123,12 @@ pub async fn run(server_url: &str, identity: &IdentityKeyPair) -> Result<()> {
             Ok(WireMessage::FileChunk { filename, chunk_index, total_chunks, sender_fingerprint, .. }) => {
                 println!("  [file chunk] {} chunk {}/{} of '{}'", sender_fingerprint, chunk_index + 1, total_chunks, filename);
             }
+            Ok(WireMessage::GroupSenderKey { sender_fingerprint, group_name, .. }) => {
+                println!("  [group] {} sent to #{}", sender_fingerprint, group_name);
+            }
+            Ok(WireMessage::SenderKeyDistribution { sender_fingerprint, group_name, .. }) => {
+                println!("  [sender key] received key from {} for #{}", sender_fingerprint, group_name);
+            }
             Err(e) => {
                 eprintln!("  failed to deserialize message: {}", e);
             }
diff --git a/warzone/crates/warzone-client/src/tui/app.rs b/warzone/crates/warzone-client/src/tui/app.rs
index a3e9357..4da7445 100644
--- a/warzone/crates/warzone-client/src/tui/app.rs
+++ b/warzone/crates/warzone-client/src/tui/app.rs
@@ -1340,6 +1340,38 @@ fn process_wire_message(
                 // Received chunk without header — ignore
             }
         }
+        WireMessage::GroupSenderKey {
+            id: _,
+            sender_fingerprint,
+            group_name,
+            generation: _,
+            counter: _,
+            ciphertext: _,
+        } => {
+            // TODO: decrypt with stored sender key for this sender+group
+            messages.lock().unwrap().push(ChatLine {
+                sender: sender_fingerprint[..sender_fingerprint.len().min(12)].to_string(),
+                text: format!("[group #{} sender-key message — key setup needed]", group_name),
+                is_system: false,
+                is_self: false,
+                message_id: None,
+            });
+        }
+        WireMessage::SenderKeyDistribution {
+            sender_fingerprint,
+            group_name,
+            chain_key: _,
+            generation: _,
+        } => {
+            // TODO: store this sender key for future group decryption
+            messages.lock().unwrap().push(ChatLine {
+                sender: "system".into(),
+                text: format!("Received sender key from {} for #{}", &sender_fingerprint[..sender_fingerprint.len().min(12)], group_name),
+                is_system: true,
+                is_self: false,
+                message_id: None,
+            });
+        }
     }
 }
 
diff --git a/warzone/crates/warzone-protocol/src/lib.rs b/warzone/crates/warzone-protocol/src/lib.rs
index 1a90816..ade9404 100644
--- a/warzone/crates/warzone-protocol/src/lib.rs
+++ b/warzone/crates/warzone-protocol/src/lib.rs
@@ -10,3 +10,4 @@ pub mod message;
 pub mod session;
 pub mod store;
 pub mod history;
+pub mod sender_keys;
diff --git a/warzone/crates/warzone-protocol/src/message.rs b/warzone/crates/warzone-protocol/src/message.rs
index 61cce17..68b230f 100644
--- a/warzone/crates/warzone-protocol/src/message.rs
+++ b/warzone/crates/warzone-protocol/src/message.rs
@@ -84,4 +84,21 @@ pub enum WireMessage {
         total_chunks: u32,
         data: Vec<u8>,
     },
+    /// Group message encrypted with sender key (O(1) instead of O(N)).
+    GroupSenderKey {
+        id: String,
+        sender_fingerprint: String,
+        group_name: String,
+        generation: u32,
+        counter: u32,
+        ciphertext: Vec<u8>,
+    },
+    /// Sender key distribution: share your sender key with a group member.
+    /// This is sent via 1:1 encrypted channel (wrapped in KeyExchange/Message).
+    SenderKeyDistribution {
+        sender_fingerprint: String,
+        group_name: String,
+        chain_key: [u8; 32],
+        generation: u32,
+    },
 }
diff --git a/warzone/crates/warzone-protocol/src/sender_keys.rs b/warzone/crates/warzone-protocol/src/sender_keys.rs
new file mode 100644
index 0000000..6a36c7e
--- /dev/null
+++ b/warzone/crates/warzone-protocol/src/sender_keys.rs
@@ -0,0 +1,210 @@
+//! Sender Keys for efficient group encryption.
+//!
+//! Instead of encrypting per-member (O(N)), each member generates a
+//! symmetric "sender key" and distributes it to all group members via
+//! 1:1 encrypted channels. Group messages are encrypted ONCE with the
+//! sender's key, and the same ciphertext is delivered to all members.
+//!
+//! Key rotation: on member join/leave, all members rotate their sender keys.
+
+use serde::{Deserialize, Serialize};
+
+use crate::crypto::{aead_decrypt, aead_encrypt, hkdf_derive};
+use crate::errors::ProtocolError;
+
+/// A sender key: symmetric key + chain for forward ratcheting.
+#[derive(Clone, Serialize, Deserialize)]
+pub struct SenderKey {
+    /// Who owns this key.
+    pub owner_fingerprint: String,
+    /// Group this key belongs to.
+    pub group_name: String,
+    /// Current chain key (ratchets forward on each message).
+    pub chain_key: [u8; 32],
+    /// Message counter.
+    pub counter: u32,
+    /// Generation (incremented on rotation).
+    pub generation: u32,
+}
+
+impl SenderKey {
+    /// Generate a new sender key for a group.
+    pub fn generate(owner_fingerprint: &str, group_name: &str) -> Self {
+        let mut chain_key = [0u8; 32];
+        rand::RngCore::fill_bytes(&mut rand::rngs::OsRng, &mut chain_key);
+        SenderKey {
+            owner_fingerprint: owner_fingerprint.to_string(),
+            group_name: group_name.to_string(),
+            chain_key,
+            counter: 0,
+            generation: 0,
+        }
+    }
+
+    /// Rotate: new random chain key, increment generation.
+    pub fn rotate(&mut self) {
+        rand::RngCore::fill_bytes(&mut rand::rngs::OsRng, &mut self.chain_key);
+        self.counter = 0;
+        self.generation += 1;
+    }
+
+    /// Derive a message key from the current chain key, then ratchet forward.
+    fn derive_message_key(&mut self) -> [u8; 32] {
+        let info = format!("wz-sk-msg-{}-{}", self.generation, self.counter);
+        let mk_bytes = hkdf_derive(&self.chain_key, b"", info.as_bytes(), 32);
+        let mut message_key = [0u8; 32];
+        message_key.copy_from_slice(&mk_bytes);
+
+        // Ratchet chain key forward
+        let ck_bytes = hkdf_derive(&self.chain_key, b"", b"wz-sk-chain", 32);
+        self.chain_key.copy_from_slice(&ck_bytes);
+        self.counter += 1;
+
+        message_key
+    }
+
+    /// Encrypt a message with this sender key.
+    pub fn encrypt(&mut self, plaintext: &[u8]) -> SenderKeyMessage {
+        let message_key = self.derive_message_key();
+        let aad = format!("{}:{}:{}", self.group_name, self.generation, self.counter - 1);
+        let ciphertext = aead_encrypt(&message_key, plaintext, aad.as_bytes());
+
+        SenderKeyMessage {
+            sender_fingerprint: self.owner_fingerprint.clone(),
+            group_name: self.group_name.clone(),
+            generation: self.generation,
+            counter: self.counter - 1,
+            ciphertext,
+        }
+    }
+
+    /// Decrypt a message from another member using their sender key.
+    /// `self` is the RECEIVER's copy of the SENDER's key.
+    pub fn decrypt(&mut self, msg: &SenderKeyMessage) -> Result<Vec<u8>, ProtocolError> {
+        // Fast-forward chain if needed (handle skipped messages)
+        if msg.generation != self.generation {
+            return Err(ProtocolError::RatchetError(format!(
+                "generation mismatch: expected {}, got {}",
+                self.generation, msg.generation
+            )));
+        }
+
+        // We need to advance to the right counter
+        while self.counter < msg.counter {
+            // Skip this message key (lost message)
+            let _ = self.derive_message_key();
+        }
+
+        if self.counter != msg.counter {
+            return Err(ProtocolError::RatchetError("counter mismatch".into()));
+        }
+
+        let message_key = self.derive_message_key();
+        let aad = format!("{}:{}:{}", msg.group_name, msg.generation, msg.counter);
+        aead_decrypt(&message_key, &msg.ciphertext, aad.as_bytes())
+    }
+}
+
+/// An encrypted group message using sender keys.
+#[derive(Clone, Serialize, Deserialize)]
+pub struct SenderKeyMessage {
+    pub sender_fingerprint: String,
+    pub group_name: String,
+    pub generation: u32,
+    pub counter: u32,
+    pub ciphertext: Vec<u8>,
+}
+
+/// Distribution message: sent via 1:1 encrypted channel to share a sender key.
+#[derive(Clone, Serialize, Deserialize)]
+pub struct SenderKeyDistribution {
+    pub sender_fingerprint: String,
+    pub group_name: String,
+    pub chain_key: [u8; 32],
+    pub generation: u32,
+}
+
+impl From<&SenderKey> for SenderKeyDistribution {
+    fn from(sk: &SenderKey) -> Self {
+        SenderKeyDistribution {
+            sender_fingerprint: sk.owner_fingerprint.clone(),
+            group_name: sk.group_name.clone(),
+            chain_key: sk.chain_key,
+            generation: sk.generation,
+        }
+    }
+}
+
+impl SenderKeyDistribution {
+    /// Convert distribution into a receiver's copy of the sender key.
+    pub fn into_sender_key(self) -> SenderKey {
+        SenderKey {
+            owner_fingerprint: self.sender_fingerprint,
+            group_name: self.group_name,
+            chain_key: self.chain_key,
+            counter: 0,
+            generation: self.generation,
+        }
+    }
+}
+
+#[cfg(test)]
+mod tests {
+    use super::*;
+
+    #[test]
+    fn basic_encrypt_decrypt() {
+        let mut alice_key = SenderKey::generate("alice", "ops");
+        // Bob gets a copy of Alice's key (via distribution)
+        let dist = SenderKeyDistribution::from(&alice_key);
+        let mut bob_copy = dist.into_sender_key();
+
+        let msg = alice_key.encrypt(b"hello group");
+        let plain = bob_copy.decrypt(&msg).unwrap();
+        assert_eq!(plain, b"hello group");
+    }
+
+    #[test]
+    fn multiple_messages() {
+        let mut alice_key = SenderKey::generate("alice", "ops");
+        let dist = SenderKeyDistribution::from(&alice_key);
+        let mut bob_copy = dist.into_sender_key();
+
+        for i in 0..10 {
+            let msg = alice_key.encrypt(format!("msg {}", i).as_bytes());
+            let plain = bob_copy.decrypt(&msg).unwrap();
+            assert_eq!(plain, format!("msg {}", i).as_bytes());
+        }
+    }
+
+    #[test]
+    fn rotation() {
+        let mut alice_key = SenderKey::generate("alice", "ops");
+        let dist1 = SenderKeyDistribution::from(&alice_key);
+        let mut bob_copy = dist1.into_sender_key();
+
+        let msg1 = alice_key.encrypt(b"before rotation");
+        let _ = bob_copy.decrypt(&msg1).unwrap();
+
+        // Rotate
+        alice_key.rotate();
+        let dist2 = SenderKeyDistribution::from(&alice_key);
+        let mut bob_copy2 = dist2.into_sender_key();
+
+        let msg2 = alice_key.encrypt(b"after rotation");
+        let plain = bob_copy2.decrypt(&msg2).unwrap();
+        assert_eq!(plain, b"after rotation");
+    }
+
+    #[test]
+    fn old_key_cant_decrypt_new() {
+        let mut alice_key = SenderKey::generate("alice", "ops");
+        let dist = SenderKeyDistribution::from(&alice_key);
+        let mut bob_old = dist.into_sender_key();
+
+        alice_key.rotate();
+
+        let msg = alice_key.encrypt(b"new generation");
+        assert!(bob_old.decrypt(&msg).is_err());
+    }
+}
diff --git a/warzone/crates/warzone-server/src/routes/messages.rs b/warzone/crates/warzone-server/src/routes/messages.rs
index 6fe757a..109fae1 100644
--- a/warzone/crates/warzone-server/src/routes/messages.rs
+++ b/warzone/crates/warzone-server/src/routes/messages.rs
@@ -18,6 +18,10 @@ fn extract_message_id(data: &[u8]) -> Option<String> {
             WireMessage::FileHeader { id, .. } => Some(id),
             WireMessage::FileChunk { id, .. } => Some(id),
             WireMessage::Receipt { message_id, .. } => Some(message_id),
+            WireMessage::GroupSenderKey { id, .. } => Some(id),
+            WireMessage::SenderKeyDistribution { sender_fingerprint, group_name, .. } => {
+                Some(format!("skd:{}:{}", sender_fingerprint, group_name))
+            }
         }
     } else {
         None
diff --git a/warzone/crates/warzone-server/src/routes/ws.rs b/warzone/crates/warzone-server/src/routes/ws.rs
index 216c50d..fa2c0f0 100644
--- a/warzone/crates/warzone-server/src/routes/ws.rs
+++ b/warzone/crates/warzone-server/src/routes/ws.rs
@@ -30,6 +30,10 @@ fn extract_message_id(data: &[u8]) -> Option<String> {
             WireMessage::FileHeader { id, .. } => Some(id),
             WireMessage::FileChunk { id, .. } => Some(id),
             WireMessage::Receipt { message_id, .. } => Some(message_id),
+            WireMessage::GroupSenderKey { id, .. } => Some(id),
+            WireMessage::SenderKeyDistribution { sender_fingerprint, group_name, .. } => {
+                Some(format!("skd:{}:{}", sender_fingerprint, group_name))
+            }
         }
     } else {
         None