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For testing purpose (that it works or not), is it possible to encrypt a directory on Live usb? I meant to say not to touch anything on main disk/installation. Simply create an encrypted folder inside live usb using ecryptfs. Will it work or it requires an installed distro?
 

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I've not tried it but it should work. Bear in mind that the file system on liove USB's are already heavily compressed and slower than a normal installed system. Adding an extra encryption layer will slow the system down even more.
Also bear in mind that USB drives are fragile, should the system lock up or freeze and you have to unplug or shut down you could corrupt the file system.
 
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