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I came across this statement in the Sparrow Wallet documentation;

Unfortunately, Bitcoin Core stores your public keys and balance unencrypted on the computer it is running on. If this computer is regularly connected to the internet, it is at risk to hackers - which will make you a target once your balance is discovered.

If this is a concern to you, consider running an Electrum server, which does not keep any record of your balance, but indexes all Bitcoin transactions equally.

And I have a few questions;

  1. Is there a specific reasoning behind keeping the public keys and balances unencrypted?
  2. Is it possible for a user to encrypt this data without breaking functionality of core?
  3. Is the only reasonable mitigation to this issue to "not use Bitcoin Core" but instead Electrum server?

Thanks!

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    Speculation: 1) So can generate receiving addresses and check balance without having to enter password of private keys. 2) By using an encrypting file system (EFS) 3) If you prefer that tradeoff between security and convenience. Apr 2 at 23:31

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