In a world like this, a person who wanted to encrypt data would have to find a way to hide the encrypted data. Many people have suggested placing the encrypted data in the least significant bit of a binary picture file. However, I suspect it is easy to distinguish between the collection of least significant bits of a normal picture file and the collection of least significant bits of a picture file used to hold some encrypted data. In other words, your picture file envelope could trigger an alarm in some government traffic sniffer.

This is probably a stupid question, but...is there anyway to take a chuck of encrypted data (presumably with a high degree of randomness) and securely munge it so it looks less random, while retaining the ability to reverse the munge and decrypt the data.

Not a stupid question at all. I would suspect that altho the least significant bits of a picture file are not very orderly, they are probably not quite a random distribution. I would suspect that in many pictures, they would form curved contour lines, outlining subtle differences in color across a picture image. Of course, some pictures are more random than others, so the best someone scanning data packets could do would be to pick out "suspicious" images to analyze further.

Any ideas? How about something fractal? <arg! I can't believe I said the "f" word> The "munge key" could be the initial state of the fractal engine. <shrug> I really don't have a clue about the randomness of the output of a fractal engine.

Well, since you mentioned the f-word, I guess I'll entertain the possibility. A fractal would probably be one way to hide data while producing an orderly looking picture. Suppose you wrote a program to calculate the Mandelbrot set (fairly common example that most people should be familiar with; if not, ask and I will clarify the math) to 256 iterations, and plot the number of iterations required for the magnitude of the complex number pair to exceed 2.0 as the intensity of the pixel (or zero for points in the set). The result is a image that many people have seen before. Now, suppose that you modify your fractal generator program slightly. For points which required more than 32 iterations, you would not plot the exact value, but instead change it +/- 1. Because the points which require a high number of iterations are in the naturally most chaotic part of the fractal, it would probably defeat "scanning" attempts to look for steg-data. In fact, the only way to discover the message would be to actually plot the fractal and compare it to the file you had - a time consuming process, especially if the cracker didn't know the exact coordinate boundries of the image, and the number of significant figures used in your calculations. Or maybe instead of accepting divergance at 2.0, you choose 2.1, or even 2.01? Lots of possibilities... If defeating a gummint traffic sniffer is your objective, consider what kind of sniffer the gummint might use. If they were just checking for randomness, they might apply a data compression technique to look for patterns (since cryptodata can't be compressed). In such a case, you could design a compression program which would "uncompress" data - that is, run a data compression in reverse; adding random repitition that a data compression program would notice. Basically, what you need to do is to design a data (un)compression system such that every possible input file maps exactly to some "uncompressed" text. You then steg the uncompressed data, and then the recipient "compresses" the data to reveal the original ciphertext, and then decrypts.

However, I suspect it is easy to distinguish between the collection of least significant bits of a normal picture file and the collection of least significant bits of a picture file used to hold some encrypted data.

This may be. The connection is not obvious, but there may be correlations because of data conversions, mechanical scanner characteristics, etc. The first step in any such system which more closely hides data is to study carefully the statistics of base images. Until you understand them, any attempt at mimicking them is bound for failure. Seeking a good understanding of the statistical properties of messages of various sorts is generally missing in cypherpunks activity. The area gets quite technical, and we as a group need to develop some better understanding of it. Eric