There's currently no Apple-provided method to securely erase your iPhone's data, and previous owners' data has been found on refurbished phones on sale at Apple. If you want to make your iPhone safe for resale by securely wiping any trace of your personal information from it, it's possible—though not easy. Security guy Jonathan Zdziarski posted his method for doing so, which requires jailbreaking your phone (here's how), then getting shell access to its hard drive, and wiping its two partitions clean using some command line fu. Warning: I have not tried this on my own iPhone, so proceed with the utmost caution. Zdziarski says the whole process can take an hour or two. Of course wiping your regular old computer hard drive is a lot easier—just grab a free utility like Eraser or Wipe Disk to do so. Update: There are a couple other good reasons to SSH into your iPhone—to copy music and other media off of it to your computer, to use it as a SOCKS proxy to get your computer online, to wirelessly sync it in Linux, and now, to wipe your data.
Completely Erase Your iPhone's Data
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