Wallet encryption

Zallet encrypts key material with age, asymmetric file encryption. During wallet setup — before any keys exist — you create an encryption identity (a file, by default {datadir}/encryption-identity.txt) and initialize the wallet with it.

From then on:

• Everything secret is encrypted to that identity: mnemonic phrases and imported spending keys are stored in the wallet database as age ciphertexts, and zallet export-mnemonic output is encrypted to it too. Decrypting any of it requires the identity file.
• The wallet database as a whole is not encrypted. Transaction history, addresses, and viewing keys are stored in the clear in wallet.db — anyone who reads the file learns your full transaction history, though they cannot spend without the identity.

The identity file can itself be protected with a passphrase (created with zallet generate-encryption-identity -p). With a passphrase-encrypted identity, the key store starts locked: operations that need spending keys fail with “Wallet is locked” until it is unlocked with the walletpassphrase RPC method (walletlock re-locks it). In non-interactive contexts the passphrase can be supplied via the ZALLET_IDENTITY_PASSPHRASE environment variable.

Consequences worth internalizing:

• Losing the identity file (or forgetting its passphrase) makes the key material in every copy of wallet.db permanently undecryptable — back it up, and see Backup and restore.
• There is no equivalent of zcashd’s encryptwallet RPC method: encryption is not something you turn on later, it is established at setup, before any key exists.