Quote from: faceplantz on October 16, 2014, 03:15:45 AM

New ways might have major flaws in it. I just have to wait until it will be perfect.

Bip38 ec multiplied two factor keys have been around for years. You can read about how it works here:

https://github.com/bitcoin/bips/blob/master/bip-0038.mediawiki#Encryption_when_EC_multiply_mode_is_used

In short, it takes advantage of the fact that in elliptic curve math, pubkey1*privkey2 = pubkey3, and privkey1*privkey2 = privkey3. So you are giving them your pubkey1 with the intermediate code, and they create a new private key and multiply it by your public key to generate a public address, and then they give you their privkey2, which enables you to get privkey3 because you also have privkey1. Your bip38 password is run through a key derivation algorithm, and eventually also sha256 hashed, which produces a pseudo-private key, which has a corresponding public key, which is used to encrypt the entire payload.

So the guy who makes the key for you can decrypt the encrypted key, but he still can't get the private key, since your privkey1 is part of the key derivation from your password before everything is sha256'd to get the shared secret between you two.

So only you, with the correct password, can recreate the correct privkey1, and then also decrypt the payload, and then use privkey1 with the now decrypted privkey2 to get the actual relevant key, privkey3.

Additionally, the key derivation function is scrypt, with some additional random bytes that you create. Because it's scrypt, it's really slow to brute force, and because you add in random bytes, rainbow tables won't work. The actual bip38 encrypted payload in a bip38 ec multiplied address is those random bytes, privkey2 from the guy who generated the key, and a checksum hash of pubkey3 to verify that everything was decrypted properly. That gives you all the information you need to be able to, along with the correct password, derive and decrypt everything and generate privkey3, which is the private key for the address that "belongs" to the bip38 encrypted key. (And then you can verify that everything worked with the checksum hash. If the hash doesn't match, the password entered was incorrect.)