The Germans used this machine in World War II. This is alluded to in the second part of the riddle. As to the first part, The Riddler's real name in the Batman universe is Edward Nygma, or E. Nygma, which is a play on the word "enigma". Both of these hints together point to the Enigma machine.
You can find online simulators of the machine and use them to send encrypted messages to your friends. When they ask how to solve it, you can give them this riddle as a hint. That's what I did. You do what you want.
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