After the bullshit advice that security noobs give here all the time about VMs and TrueCrypt, this time I will discuss shred.
Problem:Destroying wallet.dat files with shred does not work.
Why?That's not shred's fault. shred is just from another millenium. Modern operating systems use modern file systems, that don't store files at a fixed place any more. That has a lot of reasons that reach from performance improvement to better error correction after system crashes.
When you use shred on these filesystems (anything more modern than FAT and ext2), shred will write random data to the file - but that does not actually hit the disk at the spot where the file used to be. The original data of the file may survive that. For more details see the man page quotes below.
What does work?shred is still useful - for example if you wipe out entire drives before creating new filesystems. If you don't want to wipe out your whole disk every time, you have to choose between a prehistoric file system or cryptography (which is not trivial).
Read the f****ing manual!CAUTION: Note that shred relies on a very important assumption: that
the file system overwrites data in place. This is the traditional way
to do things, but many modern file system designs do not satisfy this
assumption. The following are examples of file systems on which shred
is not effective, or is not guaranteed to be effective in all file sys‐
tem modes:
* log-structured or journaled file systems, such as those supplied with
AIX and Solaris (and JFS, ReiserFS, XFS, Ext3, etc.)
* file systems that write redundant data and carry on even if some
writes fail, such as RAID-based file systems
* file systems that make snapshots, such as Network Appliance's NFS
server
* file systems that cache in temporary locations, such as NFS version 3
clients
* compressed file systems
In the case of ext3 file systems, the above disclaimer applies (and
shred is thus of limited effectiveness) only in data=journal mode,
which journals file data in addition to just metadata. In both the
data=ordered (default) and data=writeback modes, shred works as usual.
Ext3 journaling modes can be changed by adding the data=something
option to the mount options for a particular file system in the
/etc/fstab file, as documented in the mount man page (man mount).
In addition, file system backups and remote mirrors may contain copies
of the file that cannot be removed, and that will allow a shredded file
to be recovered later.
GNU shred manual from Ubuntu 11.04