I don't think the criminal is paying attention with how active the address is instead of the total coins you've trade and your current balance.
Private Keys
38717b5161c2e817020a0933e1836dd0127bdef59732d77daca20ccfbf61a7ae
The public key of this private key is
1MjGyKiRLzq4WeuJKyFZMmkjAv7rH1TABm where the balance is 0 and received 131 BTC. If I were the criminal, I will force the person tell me where's the 131 BTC and if I didn't get it, I will be mad.
It's better to use passphrase where the first wallet without passphrase is your dummy wallet that contains small amount of Bitcoin e.g. less than $100. While the other wallet that has passphrase contains most of your coins.
https://vault12.com/securemycrypto/crypto-security-basics/what-is-a-wallet-passphrase/You missing the point
1. you will chose which seed you want to have
( Like if they know you must have 1000$, use a wallet that has close to that )
2. Our automated system will start moving small funds around seed
3. We are partnering up with few services, as they keep changing wallets every few months, we will have more seeds soon
Many of these seeds .... our system will randomly initiate transactions worth $1-20 in these seeds on a weekly basis
You are describing a spam attack.
In fact this happened a couple of years ago under the name "stress test". In one of the steps of this attack the attackers released a large number of private keys and then started funding them. That meant not only the mempool was spammed with pointless transactions but also it was spammed with competing double spend transactions increasing the burden on full nodes.
This will not solve anything either. For starters these keys are publicly known so technically the attacker can know this is fake as well!
Additionally when someone is physically attacked they are not going to hesitate giving up their possessions to save themselves. As @Jawhead999 pointed out the attacker may hurt the victim more after seeing such an active wallet with so much money changing hand to force them to give up their money.
The only way to prevent that is to find a way not to be under attack!
The better solution is using the extended seed phrase. That is where you add an extra word to your own seed phrase, the seed phrase without that extra word is the decoy that can contain a small amount of coins.
The lack of activity is not as big a problem as you say because most bitcoin wallets aren't as active as you'd think and most importantly
they are NOT empty.
To top if all, the biggest flaw in your idea is that every single coin received in these wallets are spent immediately which is shouting "fake wallet"!!!
Well i think you missed whole github document, explaining that we will release new wallet every week
let me put it simple
1. You can or cannot use this, Its a free service
2. If you want to use it, use the wallet that align best with your real wallet
3. A Small Transactions happening weekly wont hurt anything
4. Also for instantly spending money, you can always make up story of putting funds in a exchange or a trading website.
5. I am getting few projects on board, websites and scripts that accept regular bitcoin payments, we will lot more wallets and transactions
The best way to avoid these attacks is
to let him think you lost it all while trading - If he doesn't believe ( lets say 50-50)
you might have 300$ in exchange or a temporary wallet you made ( You actual decoy wallet or stake.com or a exchange )
Give him 300$, and walk home safely
The point is having a decoy wallet doesn't hurt, also this is free service ofcourse you can use your brain to have a better alternative, i did not cater this service towards experienced or expert bitcoin users, its for general masses
Good Luck Thanks For Pointing out, the waiting between factor, we will see something with time lock or something else, as service grows
[moderator's note: consecutive posts merged]