it is indeed possible to do so. yet the question is, do you really need to do all that. there is many kind data protection one way is by encryption. in the database itself, the two major topic is to encrypt the database itself (which means the whole database, not only the data stored in it) or you can do column-level encryption. to encrypt the entire database is not really recommended though, since if you really need that much of security means you need to have people with that much of capability also to manage not only the data but also the security itself.
regarding your second question, whether or not it will reduce the performance of your application. it surely does will reduce your performance since, the simplest way to see it, now your engine need to work extra which is encrypting. if you ask whether or not it reduce the performance significantly then it is a different story. yet, when you really need that much security then the reduce in performance is the price you have to pay.