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I think even some experts have gotten this wrong, so I want to ask everyone: what's the current state-of-the-art for trying to crack Apple PIN codes?
This is how I think it works currently (in iOS 8).
To start with, there is a special "crypto-chip" inside the iPhone that holds your secrets (like a TPM or ARM TrustZone). I think originally it was ARM's TrustZone, but now that Apple designs its own chips, that they've customized it. I think they needed to add stuff to make Touch ID work.
All the data (on the internal flash drive) is encrypted with a random AES key that nobody, not even the NSA, can crack. This random AES key is stored on the crypto-chip. Thus, if your phone is stolen, the robbers cannot steal the data from it -- as long as your phone is locked properly.
To unlock your phone, you type in a 4 digit passcode. This passcode gets sent to the crypto-chip, which verifies the code, then gives you the AES key needed to decrypt the flash drive. This is all invisible, of course, but that's what's going on underneath the scenes. Since the NSA can't crack the AES key
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