How secure/insecure is this?

[Rassah]

How secure or insecure is it to, instead of encrypting the wallet using Bitcoin the app, in Windows 7 right-click on the wallet.dat file, chose properties > advanced > encrypt, and let windows keep it always encrypted? I am assuming this will keep the wallet file encrypted and will protect it if it is stolen, but does anyone know if the built-in encryption has some security vulnerabilities I'm not aware of?
Reason I ask is because once you encrypt the walet file using Bitcoin, most of the wallet tools don't work any more, just corrupting the file instead.

Thanks

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[Revalin]

That protects you if your computer is stolen.  It does not protect you against wallet stealer trojans or viruses for the same reason that the wallet tools do work: the key is always stored in memory and Windows will decrypt it on the fly whenever any program wants to access it.

You should either decrypt your wallet when you want to use the tools, or store your wallet in an encrypted container (TrueCrypt, FreeOTFE, Bitlocker with a USB drive) that you only unlock when you use it.

[Rassah]

That protects you if your computer is stolen.  It does not protect you against wallet stealer trojans or viruses for the same reason that the wallet tools do work: the key is always stored in memory and Windows will decrypt it on the fly whenever any program wants to access it.

You should either decrypt your wallet when you want to use the tools, or store your wallet in an encrypted container (TrueCrypt, FreeOTFE, Bitlocker with a USB drive) that you only unlock when you use it.

Thanks, that makes sense. Sadly, I have not found a way to decrypt the wallet file after the Bitcoin software encrypts it. At most there is a temporary unlock function through bitcoind, but that still keeps the wallet in an encrypted format

[Revalin]

The client doesn't support decrypting yet.  It's stubbed in to the source, so expect it in a future release.  Also, new versions of the wallet tools will probably support it.

Is it urgent?

[Rassah]

Not really. Just means I have to do my walleting the way I used to before v0.4 came out, encrypting every wallet file and only using it when I need to.

[MysteryMiner]

This helps against other users sitting in front of your computer. The EFS encryption will strike back if your windows installation becomes corrupted and you have no EFS certificate with private key backed up.

[Rassah]

Since I have all the private keys backed up anyway, I'm mainly wondering how effective this is for keeping others from stealing my wallet.dat or bitcoin remotely.

[MysteryMiner]

EFS helps against network attack when attacker can access your computer and run code with another account. I will not count to EFS, it never helped to secure me but it only caused to lose some of my files when my windows become damaged.