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TrueCrypt and its successors use a file format that has the special property, that it looks completely random, there's only a salt (which is random) and the cipher text (which looks random). I like to call this the "TrueCrypt-Paradigm".

Is there any advantage to using the TrueCrypt-Paradigm as opposed to introducing non-random data such as key-derivation parameters?

Bonus points if you can find a situation where the (theoretical) advantage actually helps / saves / whatevers you.

To be explicit: I do not ask about the disadvantages which include, but are not limited to:

  • Inflexible password based key derivation
  • Inflexible cipher selection
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Yes, there is a very real advantage. Take this hypothetical, but very likely scenario. You are storing something Very Bad(tm) that you absolutely do not want the police to find. Your opsec is pretty good, but you make a single mistake online, and the cops are on their way. It's 4 AM in the morning, and they burst in with a fresh warrant for a no-knock raid. You stand by helpless as they take every single device in your house, all of your dozen flash drives and SD cards, your hard drives, laptops, etc.

Days later, they confront you again, asking you if any of your flash drives are encrypted with something called "TrueCrypt". They know you are tech savvy enough to use it, but they also know you are tech savvy enough to wipe your flash drives. They have no idea whether or not you encrypted it, or you simply wiped it. They can't force the key out of you, they can't lock you up for refusing to give them the key, and most importantly, they can't spend a long time trying to crack all of your dozen either-wiped-or-encrypted devices because spending too much time on a single case gets investigators in a lot of trouble.

Because you used TrueCrypt, the devices which you simply wiped blend in perfectly with the devices you have encrypted. You're let free after the cops are reprimanded by an angry judge who regrets signing the warrant in the first place.

This example is especially potent in countries with mandatory key disclosure laws, where if they have evidence that you are hiding encryption, they can lock you up. If you can claim that you simply wiped your hard drive and it's all random data (which is especially plausible if you have a spare CD with DBAN burnt on it lying around), then no matter how much they want you, they'll have a very hard time getting you locked up. But even in countries without such laws, it's still an extremely good idea to prevent your adversary from knowing where to focus their efforts, or even knowing that they have found what they are looking for.

Note that this "TrueCrypt-Paradigm" is much more effective on entire disks. It is significantly less effective when used as individual volumes, because it's not that easy to explain away a large, random file sitting on your hard drive, especially if TrueCrypt is installed on that system. Not as easy as it is to explain away a hard drive with random data, where even if TrueCrypt is installed on some computer in your house, it still isn't even close to enough evidence to point to that specific hard drive being encrypted rather than just wiped.

  • See, @SEJPM, exactly my point of plausible deniability, just with more upvotes. Good we had our discussion about this already;) – Tobi Nary Apr 4 '16 at 9:32
  • Why is the police always the example? "I dont want the police to find it". And then you wonder why the gouverment is against encryption. Think about it like a diary. It's not usable for an terrorist attack but you still dont want someone to read your diary. No matter if its your spouse, parent, sister, ... whatever. – BlueWizard Apr 4 '16 at 13:29
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    @JonasDralle, the police is always the bad guys, because they have the methods to break many things (which would keep your parents, sister, etc out) but are also bound by the law (as opposed to criminals) which creates this unique composition of the attacker being powerful enough to break bad encryption and still being not able to force you to give out the password. – SEJPM Apr 4 '16 at 18:32
  • @SEJPM yea you're right – BlueWizard Apr 14 '16 at 20:12
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From the top of my head, there are two main benefits. Note that I'm using the definition from your question - not the actual file format(s) from TrueCrypt or it's successors, as my second point may not be applicable to the algorithms used in the real world.

This is without implications towards whether or not those formats look completely random or not.

  • Plausible Deniability

    If the file is found and analyzed, there is the possibility that you saying

    There is nothing in there, it's just random data.

    actually be true. This might actually help you. *nudge*

    This is especially relevant if you 'hide' one of those files between some others that are actually random data, leveraging the indistinguishability.

  • Less information leaked

    You leak no information about any of the used methods, be that cipher or key derivation. If the file contains structure that can be interpreted to make educated guesses about what may be in which part of the data, that may be a problem.

    Leaking as little information as possible is always a good choice to improve security. (No, this is not a vouch for security by obscurity; the security does not rely on this.)

    This is especially true if the ciphertext indistinguishability from random data is leveraged to 'hide' more salts in the data. Depending on the algorithm used, there is a fair chance to hide any structure from an attacker, even if the algorithm is known.

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