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Note that the described scheme relies on a key exchange protocol (such as Diffie-Hellman). Remember that a key exchange protocol allows two parties to agree on a shared key; the key will be secret even in the presence of a passive eavesdropper who can observe the messages sent during the key exchange. In that respect, the fact that the two parties can communicate without having first shared a secret key is no more surprising than the fact that a key exchange protocols exists. The difficulty tackled by the paper is to "embed" the key exchange messages in the ciphertexts of the "innocent-looking" conversation. It is true that doing this embedding would be much easier if both parties had a pre-established secret, but the main result of this paper is to show how to do the embedding without a pre-established secret.

OK, thanks.

That last part is what boggled my mind. I'll read it again.

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