Quote from: ShadowOfHarbringer on June 15, 2011, 08:22:22 PM

Quote from: Nescio on June 15, 2011, 06:25:18 PM

none of that helps against a compromised machine.

Actually, it does.
You may fool an attacker into thinking that he hacked all the layers, while he only hacked top 2 of them.
Security by obscurity + surprise element.

Quote from: Nescio on June 15, 2011, 06:25:18 PM

It will still happily grab all of your TrueCrypt passwords, your mouse movements, all the fractal windows you have open etc.

Who needs mouse movements when you can connect to a (virtual) machine using encrypted VNC connection ?
The possibilities are endless. VM is just the beginning of the things you can do.

Quote from: Nescio on June 15, 2011, 06:25:18 PM

there have been exploits for detecting and getting out of a VM (exactly because people expect VMs to be safe).

Not all of the exploits work on all kinds of VM's.
Also, a possible attacker may not be prepared for task of this level of complexity.

Quote from: Nescio on June 15, 2011, 06:25:18 PM

The only way you can be secure is by using a separate, clean, minimal installation on different hardware from the daily use, net connected machine.

This is certainly the best way, but having a hall of mirrors is also useful when you are only using single machine.
As I said, "the possibilities are endless. VM is just the beginning of things you can do".

Generally my thinking is that you can create multiple levels of complexity and every one of the makes it more difficult for the attacker to hack you.

You know what guys, if we expect the average joe to have to learn to become a security expert just to use bitcoin, then bitcoin is pretty much doomed. If not it will just remain an anarchistic/libertarian geek's version of paypal. Or it could just piss off the government who will use this as an excuse to go after the exchangers/users because of claims that stolen bitcoin funds could be used to fund terrorism.