The thought exercises are fascinating. Say he has a completely trustworthy friend somewhere that the FBI is unaware of. Could he have that person spend a little, back up that copy again, and effectively keep that FBI from ever getting that money?
Also, surely a backup exists. What is an effective way to backup the wallet so that it can survive decades of prison time? Particularly if a trustworthy friend does not exist?
Why is that? So if I have several backups of my bitcoin wallet, and I spend from one of them, the others become invalid, so I'd have to keep updating them? Isn't it just a private key you are storing that would not ever change? So if they were able to get to the private key why would they not be able to spend even if he has spent some on the backup?
I'm not sure if this is exactly what the parent meant, but there are two things at play here:
- Deliberate invalidation: "sweeping" is the process of transferring all funds from a wallet into another one. If the owner ever gets access to some private computer time and one of his wallet backups, he can empty everything into a new address - one where the private key is stored in an undisclosed location, even his brain. Anyone with access to the wallet file in question in this article would do well to sweep it into a new address now.
- The reference client creates 100 addresses at a time and stores their keys in a file. New addresses are used by default for "change." Change is another subject entirely, but the end result is that yes, you do need to keep updating your backups every 100 transactions or so. This has the nice effect of helping anonymity and passively invalidating that file you forgot about, and the not-so-nice effect of being annoying. Some other clients have different behavior.
To be precise, transactions must explicitly state all output addresses, and the default behavior of the client is to transfer the "change" back to a new address owned by the party doing the transaction to increase anonymity. It is however possible to redirect the change back to the original address.
Well yes, it also works the other way - if the FBI manages to spend anything from the wallet they have, it will render all other backups of it invalid.
They would need to break the encryption first though.
