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There should have been no way to get to that situation without: 1. Being offered the option to use the passphrase as input to a KDF, with warning about strength. 2. Being warned to store key backup on paper, and that data WILL BE GONE PERMANENTLY if you don't.
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They do use a KDF but only use the resulting key to encrypt the header. It's the approach used by most disk encryption implementations in order to allow the user to rotate the password without having to encrypt the whole drive again, only the header. Easy to make that atomic too.
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Sure, but the user wanting to change their passphrase is different than them wanting to rotate the underlying disk encryption key. It could require a lot of time and storage space or simply backing up, resetting and restoring from the backup.
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That's how it works on iPhones. Snapdragon has a similar hardware feature and AOSP supports it but it's not actually used on the reference devices (Pixels) probably because they prefer being able to verify that the inline encryption support is actually working as intended.
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Even though you're setting disk encryption keys in hardware registers used to do inline decryption/encryption, you can normally check that it's working as intended by comparing the results in both directions with software. If you use the wrapped key protection, you can't do that.
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