The system itself is stripped down so there is no way to use a keyboard or external storage.Kernel is modified to have the same encrypting function, which works as decryptor. Now here is the most interesting/suspect part: The initrd itself is encrypted using a custom C function, basically each byte is XOR'ed using a custom made pseudo random generator.
Initrd will try to mount the filesystem using that generated password. (a hash function is used, did not decide yet over md5 or sha1).
I am trying to copy-protect some work, which is a bootable SD card booting a Linux kernel on ARM device (Raspberry Pi).