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Digital watermarking is referred to a method used for copyright protection and authentication. In this paper, we present a method of nested digital watermark embedding and extraction in which a nested watermark (a watermark inside another watermark) is embedded into the main image. This concept of nested watermarking is used to increase the watermark embedding capacity. In this method, a watermark is embedded into another watermark which is considered as the main watermark and then this main watermark is embedded into the cover image (main image). These watermarks are encrypted before embedding in order to have increased safety, thus to perform encryption and decryption process we used the Blowfish algorithm. Therefore, our research work is focused on increasing the embedding capacity and improving security of the watermarks.