So we cannot break the deniability feature in TrueCrypt 6.0. But, honestly, I wouldn't trust it.
He doesn't seem to provide a
reason to not trust it. I would take the direct statement of fact over his gut feeling.
Fair enough. But cryptology is more of a black art than anything else, and I trust Schneier's gut feeling more than most.
If you want to encrypt wallet files for backups, use GPG.
If you want to protect the wallet file from being stolen from your disk, use encrypted folders of the kind that your operating system provides. But don't expect it to be protected against malware while in use. Everything you have access to, the malware you catch has access to, too. It will protect you against people who steal your computer, but it will not protect you against malware.
Truecrypt will do *both*, if you set your .bitcoin directory to inside the container. To backup you simply copy the container. The wallet never touches the drive unencrypted, and there's no need to trust your operating system to do it right (EFS in Windows is breakable).
You can even have a fake wallet with the real wallet in a hidden volume. If the directory structure is the same, no traces will be left on-disk if you use the hidden one or not.
I like your paraphrasing.
Sure, TrueCrypt can do that. However, there are other reasons why I think it is inferior to PGP -- portability, standardization, existence of a commercial implementation, license, and the fact that it has been looked at long and hard since the cypherpunks of the 90s. GnuPG also doesn't require kernel module and it already installed in most (all?) current Linux distributions. Plus, we should be using it anyways.
What about in-memory attacks? Using truecrypt, you will have parts of the file in-memory, and even in-swap, such that it could get on the hard-drive. Not to mention someone can sniff your Truecrypt password either keylogging it or in-memory. Even using a VM would do nothing to increase security, you must absolutely make sure you have no malware running on any outer OS layer from which you access your wallet from.
Woah, didn't know about that. I just might jump ship to GPG because of this new information (assuming GPG doesn't store my password in-memory too).
To be fair, these same issues exist with other disk-encryption schemes, like filevault. If someone has a keylogger on your computer, you're sunk no matter what.
Good point about the secure deletion, but the solution to run an srm (or rm -P) on the file just seems easier to me than to install a whole other crypto framework.
By srm do you mean the shred command? Also I couldn't find the -P switch on the rm man page, what does it do?
Yes, I meant the local shred command. It depends of which UNIX or Linux you are using. Check your man pages to see which options apply.
