diff --git a/.gitignore b/.gitignore
index fea7df6c2..f84fe6040 100644
--- a/.gitignore
+++ b/.gitignore
@@ -10,3 +10,8 @@
 .DS_Store
 */**/.DS_Store
 .ethtest
+
+#*
+.#*
+*#
+*~
diff --git a/crypto/key.go b/crypto/key.go
new file mode 100644
index 000000000..d371ad4dc
--- /dev/null
+++ b/crypto/key.go
@@ -0,0 +1,107 @@
+/*
+	This file is part of go-ethereum
+
+	go-ethereum is free software: you can redistribute it and/or modify
+	it under the terms of the GNU Lesser General Public License as published by
+	the Free Software Foundation, either version 3 of the License, or
+	(at your option) any later version.
+
+	go-ethereum is distributed in the hope that it will be useful,
+	but WITHOUT ANY WARRANTY; without even the implied warranty of
+	MERCHANTABILITY or FITNESS FOR A PARTICULAR PURPOSE.  See the
+	GNU General Public License for more details.
+
+	You should have received a copy of the GNU Lesser General Public License
+	along with go-ethereum.  If not, see <http://www.gnu.org/licenses/>.
+*/
+/**
+ * @authors
+ * 	Gustav Simonsson <gustav.simonsson@gmail.com>
+ * @date 2015
+ *
+ */
+
+package crypto
+
+import (
+	"bytes"
+	"code.google.com/p/go-uuid/uuid"
+	"crypto/ecdsa"
+	"crypto/elliptic"
+	"encoding/json"
+	"io"
+)
+
+type Key struct {
+	Id *uuid.UUID // Version 4 "random" for unique id not derived from key data
+	// we only store privkey as pubkey/address can be derived from it
+	// privkey in this struct is always in plaintext
+	PrivateKey *ecdsa.PrivateKey
+}
+
+type plainKeyJSON struct {
+	Id         []byte
+	PrivateKey []byte
+}
+
+type cipherJSON struct {
+	Salt       []byte
+	IV         []byte
+	CipherText []byte
+}
+
+type encryptedKeyJSON struct {
+	Id     []byte
+	Crypto cipherJSON
+}
+
+func (k *Key) Address() []byte {
+	pubBytes := FromECDSAPub(&k.PrivateKey.PublicKey)
+	return Sha3(pubBytes)[12:]
+}
+
+func (k *Key) MarshalJSON() (j []byte, err error) {
+	jStruct := plainKeyJSON{
+		*k.Id,
+		FromECDSA(k.PrivateKey),
+	}
+	j, err = json.Marshal(jStruct)
+	return j, err
+}
+
+func (k *Key) UnmarshalJSON(j []byte) (err error) {
+	keyJSON := new(plainKeyJSON)
+	err = json.Unmarshal(j, &keyJSON)
+	if err != nil {
+		return err
+	}
+
+	u := new(uuid.UUID)
+	*u = keyJSON.Id
+	k.Id = u
+
+	k.PrivateKey = ToECDSA(keyJSON.PrivateKey)
+
+	return err
+}
+
+func NewKey(rand io.Reader) *Key {
+	randBytes := make([]byte, 32)
+	_, err := rand.Read(randBytes)
+	if err != nil {
+		panic("key generation: could not read from random source: " + err.Error())
+	}
+	reader := bytes.NewReader(randBytes)
+	_, x, y, err := elliptic.GenerateKey(S256(), reader)
+	if err != nil {
+		panic("key generation: elliptic.GenerateKey failed: " + err.Error())
+	}
+	privateKeyMarshalled := elliptic.Marshal(S256(), x, y)
+	privateKeyECDSA := ToECDSA(privateKeyMarshalled)
+
+	key := new(Key)
+	id := uuid.NewRandom()
+	key.Id = &id
+	key.PrivateKey = privateKeyECDSA
+	return key
+}
diff --git a/crypto/key_store_passphrase.go b/crypto/key_store_passphrase.go
new file mode 100644
index 000000000..e30a0a785
--- /dev/null
+++ b/crypto/key_store_passphrase.go
@@ -0,0 +1,245 @@
+/*
+	This file is part of go-ethereum
+
+	go-ethereum is free software: you can redistribute it and/or modify
+	it under the terms of the GNU Lesser General Public License as published by
+	the Free Software Foundation, either version 3 of the License, or
+	(at your option) any later version.
+
+	go-ethereum is distributed in the hope that it will be useful,
+	but WITHOUT ANY WARRANTY; without even the implied warranty of
+	MERCHANTABILITY or FITNESS FOR A PARTICULAR PURPOSE.  See the
+	GNU General Public License for more details.
+
+	You should have received a copy of the GNU Lesser General Public License
+	along with go-ethereum.  If not, see <http://www.gnu.org/licenses/>.
+*/
+/**
+ * @authors
+ * 	Gustav Simonsson <gustav.simonsson@gmail.com>
+ * @date 2015
+ *
+ */
+/*
+
+This key store behaves as KeyStorePlain with the difference that
+the private key is encrypted and on disk uses another JSON encoding.
+
+Cryptography:
+
+1. Encryption key is scrypt derived key from user passphrase. Scrypt parameters
+   (work factors) [1][2] are defined as constants below.
+2. Scrypt salt is 32 random bytes from CSPRNG. It is appended to ciphertext.
+3. Checksum is SHA3 of the private key bytes.
+4. Plaintext is concatenation of private key bytes and checksum.
+5. Encryption algo is AES 256 CBC [3][4]
+6. CBC IV is 16 random bytes from CSPRNG. It is appended to ciphertext.
+7. Plaintext padding is PKCS #7 [5][6]
+
+Encoding:
+
+1. On disk, ciphertext, salt and IV are encoded in a nested JSON object.
+   cat a key file to see the structure.
+2. byte arrays are base64 JSON strings.
+3. The EC private key bytes are in uncompressed form [7].
+   They are a big-endian byte slice of the absolute value of D [8][9].
+4. The checksum is the last 32 bytes of the plaintext byte array and the
+   private key is the preceeding bytes.
+
+References:
+
+1. http://www.tarsnap.com/scrypt/scrypt-slides.pdf
+2. http://stackoverflow.com/questions/11126315/what-are-optimal-scrypt-work-factors
+3. http://en.wikipedia.org/wiki/Advanced_Encryption_Standard
+4. http://en.wikipedia.org/wiki/Block_cipher_mode_of_operation#Cipher-block_chaining_.28CBC.29
+5. https://leanpub.com/gocrypto/read#leanpub-auto-block-cipher-modes
+6. http://tools.ietf.org/html/rfc2315
+7. http://bitcoin.stackexchange.com/questions/3059/what-is-a-compressed-bitcoin-key
+8. http://golang.org/pkg/crypto/ecdsa/#PrivateKey
+9. https://golang.org/pkg/math/big/#Int.Bytes
+
+*/
+
+package crypto
+
+import (
+	"bytes"
+	"code.google.com/p/go-uuid/uuid"
+	"code.google.com/p/go.crypto/scrypt"
+	"crypto/aes"
+	"crypto/cipher"
+	crand "crypto/rand"
+	"encoding/json"
+	"errors"
+	"io"
+	"os"
+	"path"
+)
+
+const (
+	// 2^18 / 8 / 1 uses 256MB memory and approx 1s CPU time on a modern CPU.
+	scryptN     = 1 << 18
+	scryptr     = 8
+	scryptp     = 1
+	scryptdkLen = 32
+)
+
+type keyStorePassphrase struct {
+	keysDirPath string
+}
+
+func NewKeyStorePassphrase(path string) KeyStore2 {
+	return &keyStorePassphrase{path}
+}
+
+func (ks keyStorePassphrase) GenerateNewKey(rand io.Reader, auth string) (key *Key, err error) {
+	return GenerateNewKeyDefault(ks, rand, auth)
+}
+
+func (ks keyStorePassphrase) GetKey(keyId *uuid.UUID, auth string) (key *Key, err error) {
+	keyBytes, err := DecryptKey(ks, keyId, auth)
+	if err != nil {
+		return nil, err
+	}
+	key = &Key{
+		Id:         keyId,
+		PrivateKey: ToECDSA(keyBytes),
+	}
+	return key, err
+}
+
+func (ks keyStorePassphrase) StoreKey(key *Key, auth string) (err error) {
+	authArray := []byte(auth)
+	salt := getEntropyCSPRNG(32)
+	derivedKey, err := scrypt.Key(authArray, salt, scryptN, scryptr, scryptp, scryptdkLen)
+	if err != nil {
+		return err
+	}
+
+	keyBytes := FromECDSA(key.PrivateKey)
+	keyBytesHash := Sha3(keyBytes)
+	toEncrypt := PKCS7Pad(append(keyBytes, keyBytesHash...))
+
+	AES256Block, err := aes.NewCipher(derivedKey)
+	if err != nil {
+		return err
+	}
+
+	iv := getEntropyCSPRNG(aes.BlockSize) // 16
+	AES256CBCEncrypter := cipher.NewCBCEncrypter(AES256Block, iv)
+	cipherText := make([]byte, len(toEncrypt))
+	AES256CBCEncrypter.CryptBlocks(cipherText, toEncrypt)
+
+	cipherStruct := cipherJSON{
+		salt,
+		iv,
+		cipherText,
+	}
+	keyStruct := encryptedKeyJSON{
+		*key.Id,
+		cipherStruct,
+	}
+	keyJSON, err := json.Marshal(keyStruct)
+	if err != nil {
+		return err
+	}
+
+	return WriteKeyFile(key.Id.String(), ks.keysDirPath, keyJSON)
+}
+
+func (ks keyStorePassphrase) DeleteKey(keyId *uuid.UUID, auth string) (err error) {
+	// only delete if correct passphrase is given
+	_, err = DecryptKey(ks, keyId, auth)
+	if err != nil {
+		return err
+	}
+
+	keyDirPath := path.Join(ks.keysDirPath, keyId.String())
+	return os.RemoveAll(keyDirPath)
+}
+
+func DecryptKey(ks keyStorePassphrase, keyId *uuid.UUID, auth string) (keyBytes []byte, err error) {
+	fileContent, err := GetKeyFile(ks.keysDirPath, keyId)
+	if err != nil {
+		return nil, err
+	}
+
+	keyProtected := new(encryptedKeyJSON)
+	err = json.Unmarshal(fileContent, keyProtected)
+
+	salt := keyProtected.Crypto.Salt
+
+	iv := keyProtected.Crypto.IV
+
+	cipherText := keyProtected.Crypto.CipherText
+
+	authArray := []byte(auth)
+	derivedKey, err := scrypt.Key(authArray, salt, scryptN, scryptr, scryptp, scryptdkLen)
+	if err != nil {
+		return nil, err
+	}
+
+	AES256Block, err := aes.NewCipher(derivedKey)
+	if err != nil {
+		return nil, err
+	}
+
+	AES256CBCDecrypter := cipher.NewCBCDecrypter(AES256Block, iv)
+	paddedPlainText := make([]byte, len(cipherText))
+	AES256CBCDecrypter.CryptBlocks(paddedPlainText, cipherText)
+
+	plainText := PKCS7Unpad(paddedPlainText)
+	if plainText == nil {
+		err = errors.New("Decryption failed: PKCS7Unpad failed after decryption")
+		return nil, err
+	}
+
+	keyBytes = plainText[:len(plainText)-32]
+	keyBytesHash := plainText[len(plainText)-32:]
+	if !bytes.Equal(Sha3(keyBytes), keyBytesHash) {
+		err = errors.New("Decryption failed: checksum mismatch")
+		return nil, err
+	}
+	return keyBytes, err
+}
+
+func getEntropyCSPRNG(n int) []byte {
+	mainBuff := make([]byte, n)
+	_, err := io.ReadFull(crand.Reader, mainBuff)
+	if err != nil {
+		panic("key generation: reading from crypto/rand failed: " + err.Error())
+	}
+	return mainBuff
+}
+
+// From https://leanpub.com/gocrypto/read#leanpub-auto-block-cipher-modes
+func PKCS7Pad(in []byte) []byte {
+	padding := 16 - (len(in) % 16)
+	if padding == 0 {
+		padding = 16
+	}
+	for i := 0; i < padding; i++ {
+		in = append(in, byte(padding))
+	}
+	return in
+}
+
+func PKCS7Unpad(in []byte) []byte {
+	if len(in) == 0 {
+		return nil
+	}
+
+	padding := in[len(in)-1]
+	if int(padding) > len(in) || padding > aes.BlockSize {
+		return nil
+	} else if padding == 0 {
+		return nil
+	}
+
+	for i := len(in) - 1; i > len(in)-int(padding)-1; i-- {
+		if in[i] != padding {
+			return nil
+		}
+	}
+	return in[:len(in)-int(padding)]
+}
diff --git a/crypto/key_store_plain.go b/crypto/key_store_plain.go
new file mode 100644
index 000000000..b6e2a309a
--- /dev/null
+++ b/crypto/key_store_plain.go
@@ -0,0 +1,114 @@
+/*
+	This file is part of go-ethereum
+
+	go-ethereum is free software: you can redistribute it and/or modify
+	it under the terms of the GNU Lesser General Public License as published by
+	the Free Software Foundation, either version 3 of the License, or
+	(at your option) any later version.
+
+	go-ethereum is distributed in the hope that it will be useful,
+	but WITHOUT ANY WARRANTY; without even the implied warranty of
+	MERCHANTABILITY or FITNESS FOR A PARTICULAR PURPOSE.  See the
+	GNU General Public License for more details.
+
+	You should have received a copy of the GNU Lesser General Public License
+	along with go-ethereum.  If not, see <http://www.gnu.org/licenses/>.
+*/
+/**
+ * @authors
+ * 	Gustav Simonsson <gustav.simonsson@gmail.com>
+ * @date 2015
+ *
+ */
+
+package crypto
+
+import (
+	"code.google.com/p/go-uuid/uuid"
+	"encoding/json"
+	"fmt"
+	"io"
+	"io/ioutil"
+	"os"
+	"os/user"
+	"path"
+)
+
+// TODO: rename to KeyStore when replacing existing KeyStore
+type KeyStore2 interface {
+	// create new key using io.Reader entropy source and optionally using auth string
+	GenerateNewKey(io.Reader, string) (*Key, error)
+	GetKey(*uuid.UUID, string) (*Key, error) // key from id and auth string
+	StoreKey(*Key, string) error             // store key optionally using auth string
+	DeleteKey(*uuid.UUID, string) error      // delete key by id and auth string
+}
+
+type keyStorePlain struct {
+	keysDirPath string
+}
+
+// TODO: copied from cmd/ethereum/flags.go
+func DefaultDataDir() string {
+	usr, _ := user.Current()
+	return path.Join(usr.HomeDir, ".ethereum")
+}
+
+func NewKeyStorePlain(path string) KeyStore2 {
+	return &keyStorePlain{path}
+}
+
+func (ks keyStorePlain) GenerateNewKey(rand io.Reader, auth string) (key *Key, err error) {
+	return GenerateNewKeyDefault(ks, rand, auth)
+}
+
+func GenerateNewKeyDefault(ks KeyStore2, rand io.Reader, auth string) (key *Key, err error) {
+	defer func() {
+		if r := recover(); r != nil {
+			err = fmt.Errorf("GenerateNewKey error: %v", r)
+		}
+	}()
+	key = NewKey(rand)
+	err = ks.StoreKey(key, auth)
+	return key, err
+}
+
+func (ks keyStorePlain) GetKey(keyId *uuid.UUID, auth string) (key *Key, err error) {
+	fileContent, err := GetKeyFile(ks.keysDirPath, keyId)
+	if err != nil {
+		return nil, err
+	}
+
+	key = new(Key)
+	err = json.Unmarshal(fileContent, key)
+	return key, err
+}
+
+func (ks keyStorePlain) StoreKey(key *Key, auth string) (err error) {
+	keyJSON, err := json.Marshal(key)
+	if err != nil {
+		return err
+	}
+	err = WriteKeyFile(key.Id.String(), ks.keysDirPath, keyJSON)
+	return err
+}
+
+func (ks keyStorePlain) DeleteKey(keyId *uuid.UUID, auth string) (err error) {
+	keyDirPath := path.Join(ks.keysDirPath, keyId.String())
+	err = os.RemoveAll(keyDirPath)
+	return err
+}
+
+func GetKeyFile(keysDirPath string, keyId *uuid.UUID) (fileContent []byte, err error) {
+	id := keyId.String()
+	return ioutil.ReadFile(path.Join(keysDirPath, id, id))
+}
+
+func WriteKeyFile(id string, keysDirPath string, content []byte) (err error) {
+	keyDirPath := path.Join(keysDirPath, id)
+	keyFilePath := path.Join(keyDirPath, id)
+	err = os.MkdirAll(keyDirPath, 0700) // read, write and dir search for user
+	if err != nil {
+		return err
+	}
+	return ioutil.WriteFile(keyFilePath, content, 0600) // read, write for user
+}
diff --git a/crypto/key_store_test.go b/crypto/key_store_test.go
new file mode 100644
index 000000000..16c0e476d
--- /dev/null
+++ b/crypto/key_store_test.go
@@ -0,0 +1,85 @@
+package crypto
+
+import (
+	crand "crypto/rand"
+	"reflect"
+	"testing"
+)
+
+func TestKeyStorePlain(t *testing.T) {
+	ks := NewKeyStorePlain(DefaultDataDir())
+	pass := "" // not used but required by API
+	k1, err := ks.GenerateNewKey(crand.Reader, pass)
+	if err != nil {
+		t.Fatal(err)
+	}
+
+	k2 := new(Key)
+	k2, err = ks.GetKey(k1.Id, pass)
+	if err != nil {
+		t.Fatal(err)
+	}
+
+	if !reflect.DeepEqual(k1.Id, k2.Id) {
+		t.Fatal(err)
+	}
+
+	if !reflect.DeepEqual(k1.PrivateKey, k2.PrivateKey) {
+		t.Fatal(err)
+	}
+
+	err = ks.DeleteKey(k2.Id, pass)
+	if err != nil {
+		t.Fatal(err)
+	}
+}
+
+func TestKeyStorePassphrase(t *testing.T) {
+	ks := NewKeyStorePassphrase(DefaultDataDir())
+	pass := "foo"
+	k1, err := ks.GenerateNewKey(crand.Reader, pass)
+	if err != nil {
+		t.Fatal(err)
+	}
+	k2 := new(Key)
+	k2, err = ks.GetKey(k1.Id, pass)
+	if err != nil {
+		t.Fatal(err)
+	}
+	if !reflect.DeepEqual(k1.Id, k2.Id) {
+		t.Fatal(err)
+	}
+
+	if !reflect.DeepEqual(k1.PrivateKey, k2.PrivateKey) {
+		t.Fatal(err)
+	}
+
+	err = ks.DeleteKey(k2.Id, pass) // also to clean up created files
+	if err != nil {
+		t.Fatal(err)
+	}
+}
+
+func TestKeyStorePassphraseDecryptionFail(t *testing.T) {
+	ks := NewKeyStorePassphrase(DefaultDataDir())
+	pass := "foo"
+	k1, err := ks.GenerateNewKey(crand.Reader, pass)
+	if err != nil {
+		t.Fatal(err)
+	}
+
+	_, err = ks.GetKey(k1.Id, "bar") // wrong passphrase
+	if err == nil {
+		t.Fatal(err)
+	}
+
+	err = ks.DeleteKey(k1.Id, "bar") // wrong passphrase
+	if err == nil {
+		t.Fatal(err)
+	}
+
+	err = ks.DeleteKey(k1.Id, pass) // to clean up
+	if err != nil {
+		t.Fatal(err)
+	}
+}