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So how does this actually work? The private keys are stored offline?
Your encrypted private keys are stored in Chrome Storage, they are encrypted via your password digest so your password is never stored.
I like it. One thing I would add though is the ability to display your receiving address as a QR code, since I generally use my phone for BTC transactions.
The way you hash passwords is wrong, and worst by someone involved in bitcoin. var passwordDigest = Crypto.SHA256( $scope.password )