Subject: [bitcoin-dev] Encryption of an existing BIP39 mnemonic without changing the seed

From: Tobias Kaupat <[email-masked]>
Date: Wed, 5 May 2021 19:32:05 +0200

Hi all,
I want to start a discussion about a use case I have and a possible
solution. I have not found any satisfying solution to this use case yet.

*Use case:*
An existing mnemonic (e.g. for a hardware wallet) should be saved on a
paper backup in a password encrypted form. The encrypted form should be a
mnemonic itself to keep all backup properties like error correction.

*Suggested solution:*
1) Take the existing mnemonic and extract the related entropy
2) Create a SHA526 hash (key) from a user defined password
3) Use the key as input for an AES CTR (empty IV) to encrypt the entropy
4) Derive a new mnemonic from the encrypted entropy to be stored on a paper
backup

We can add some hints to the paper backp that the mnemonic is encrypted, or
prefix it with "*" to make clear it's not usable without applying the
password via the algorithm above.

To restore the original mnemonic, one must know the password and need to
follow the process above again.

An example implementation in GoLang can be found here:
https://github.com/Niondir/go-bip39/blob/master/encyrption_test.go

*Why not use the existing BIP-39 Passphrase?*
When generating a mnemonic with passphrase, the entropy is derived from the
passphrase. When you have an existing mnemonic without a passphrase, any
attempt to add a passphrase will end up in a different seed and thus a
different private key. What we actually need is to encrypt the entropy.

I'm open for your feedback. All encryption parameters are up to discussion
and the whole proposal needs a security review. It's just the first draft.

*Existing solutions*
One solution I found is "Seedshift" which can be found here:
https://github.com/mifunetoshiro/Seedshift

But I consider it less secure and I would like to suggest a solution based
on provably secure algorithms rather than a "rot23 derivation". Also using
a date as password seems not very clever to me.

Kind regards
Tobias