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I'm not sure if they do, but it would be cool if dropbox offered an encrypted version of their service for people who are worried.

If dropbox were to offer encryption, it would not make things more secure since I'd have to hand them unencrypted bits.

If I were to store bits that need encryption on a service like this I would encrypt them before I hand them off.

Well they have a desktop client. They could easily encrypt it there.

The web client is a bit more of a problem, they would just have to promise to encrypt it right away.