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I created a wallet.dat with Bitcoin Core on a new PC. Then I encrypted it with the GUI menu.

When I reloaded that computer, I was shocked to see that Bitcoin Core did NOT ask me to decrypt/unlock the wallet.dat -- it just loaded it right back up. The only indication I got that it was encrypted was that the "Encrypt wallet" menu item was disabled/greyed out. Not even a small text saying: "This wallet is encrypted."

Obviously, this made me feel as if it was not encrypted at all. So, assuming that Bitcoin Core had saved some kind of decryption file on my other computer from which it auto-decrypts it or something, I transferred the wallet.dat over to my current computer, also running Bitcoin Core. Same thing there: the only indication that it's encrypted is that disabled menu item.

Nothing else. I'm able to read the labels and see all the receive addresses and everything. Since the wallet has no actual Bitcoins in it yet, I can't test to make a transaction, but hopefully, at least that will prompt for the decryption passphrase.

Is there something I'm missing? Why isn't encrypting a wallet.dat actually encrypting its data? Is this like that idiotic practice that WinZip/ZIP format used to do where you could see all the files and the filenames but just couldn't read the file contents without the password? I never understood the point of that, and I certainly don't understand the point of Bitcoin's encryption if all it does is prevent you from sending coins away, but still allow you to snoop on the labels and receive addresses and all that.

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Only the private keys are encrypted if you have an encrypted wallet.dat. The passphrase is only asked when those are needed, i.e. when you try to send coins.

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  • Okay. Why is that?
    – Nicholes H
    Jan 20 at 23:30
  • @NicholesH probably because A) The private keys are the only important data in the wallet, everything else is either public knowledge or relatively inconsequential. and B) to avoid causing what some users would consider unnecessary annoyance. Jan 21 at 0:20
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    The direct reason is probably because that's what the person who worked on it cared about, and not many people argued otherwise. Personally I think this makes sense, as the privacy functionality (if desired) is much better fullfilled by the operating system, by encrypting the whole disk. But protection of funds beyond encryption of user data isn't something that's easy to do outside of the wallet software. Jan 21 at 0:24
  • I'm not sure I follow the reasoning. It seems like a very major privacy implication to have all your labels leaked. I've seen guides that tell you to "safely upload your wallet.dat to the cloud now that you've encrypted it". Of course, I would never follow such inane advice, but others might, thinking that the encryption applies to the entire wallet.dat and not just the sending of money part.
    – Nicholes H
    Jan 21 at 0:43
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    It’s not really the fault of wallet encryption written a decade ago that people today are giving poor advice though.
    – Claris
    Jan 21 at 1:16

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