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This is embarrassing. What The Guardian (and, earlier, HN) is describing simply isn't a security flaw; rather, HN appears to have had a mild temper tantrum over the lack of a cosmetic "security" feature that, had Chrome implemented it, could have just as easily led to another temper tantrum over how easy it is to bypass. |
This is a big deal because it makes reading passwords easy to do in seconds, and easy to do inconspicuously.
If you were to modify the DOM to unmask passwords it would take longer, and it's not something you can do while a co-worker or friend lends you their laptop for a minute. This flaw presents additional opportunity to anyone who wants to read another person's passwords.
It is not merely "cosmetic." It actually presents a real problem for anyone who does not logout of their account every time someone else uses their computer. Sure, this is probably best practice — but it is also insulting, inconvenient and an unrealistic expectation.
If I have unrestricted access to your machine, your passwords are compromised. Fine. But this is not a common or realistic scenario. It is far more likely I am using your machine with you, and then you walk out for 20 seconds to get a glass of water.