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I have an external drive which I used to do encrypted TM backups to, via a direct USB connection (i.e. the entire drive became encrypted - Lion).

I would like to switch to wireless backups but without allowing the data to become accessible to other people in my network.

I thought about attaching the encrypted drive to a Mac server on the network and to somehow back to there - the problem is how do I get the unlocking of the drive to occur only on my local machine? (I can't allow other users who log into that server to access the files on the drive if it were to be unlocked by the server)

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I don't think that you can do quite what you are proposing (have the external drive connected to the server and only accessible to your local machine. That said, Time Machine at least used to be able to create a new encrypted disk image on network shares and back up to that. (In fact, under Leopard this was the only way to create an encrypted backup volume for use on a local drive.)

Unfortunately, I don't know whether the Time Machine service on your Mac Server will store your backup in a per-machine encrypted disk image like Time Machine on Leopard would. Maybe someone else can answer that piece.

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