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The answer is in the question. Proxmox by default uses a separate partition/drive for data which isn't protected by LUKS. If you decide to just use a big root partition, you're right this wouldn't be needed. But if you use unencrypted disks for data, you can "extend" your encryption chain of trust by doing file based encryption on them with the key on the proxmox root drive with restrictive permissions.

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@pl804
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Answer selected by noahbliss
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