PHP Password Hashing in 2011 - security

I'm bringing this up after spending a few hours trawling through a number of posts on SO with regards to the most secure way to handle passwords in PHP/MySQL. Most answers seem to be fairly out of date, as are links that people are directed to. Many recommend md5 and sha-1.
We all know that MD5 and SHA-1 are no longer worth using due to the fact that they have been reversed, and also because there are a number of databases out there that have built up millions of md5/sha1 strings. Now, obviously you get around this with salt, which I intend to do.
I have however recently started playing around with whirlpool, which seems much more secure, and up to date. Would I be right in thinking whirlpool+salt is ample protection for passwords?
I was actually considering something like this:
<?php
$static_salt = 'some_static_salt_string_hard_coded';
$password = 'some_password_here';
$salt = 'unique_salt_generated_here';
$encoded = hash('whirlpool', $static_salt.$password.$salt);
?>
What do you think? Overkill or sensible?

This is probably good enough for most applications.
However, salts become (almost) useless if your DB is leaked -- including the static one if your configuration file is leaked too. They are a good protection against rainbow tables, but nowadays it's easier to use a bunch of GPUs to brute-force a given hash.
IMHO, currently the best solution is to use bcrypt. It's apparently supported in PHP 5.3+, and here's an example of how to use it.

This will be enough (however, there is no sense in static hardcoded salt). And, why not to use SHA256? Whirlpool is rarely used.

It's particularly meaningless to discuss the merits of particular algorithms without a much wider consideration of the threat models and specifics of implementations.
Yes, whirlpool does appear to have some advantages in terms of how effective it is as a hash, but as Nickolay says that may be deceptive and due to the fact it is less widely used. But there are other considerations too - for some purposes storing a 128 character string for each account may be an unnecessary overhead. For everyone it's a question of what the software supports (and some people might want to use the same account record to control access to different systems).
At the end of the day, it doesn't matter how sophisticated your hashing algorithm is:
given a free choice, users pick bad, guessable passwords
users will use the same password for different services
If it works for you - then great - but there is no universal solution.

Related

Does obfuscating a security model have a place in password security?

When it comes to password security there are things that people agree on like storing salted hashes of passwords, which gives a statistical defense against a compromised model and data.
What some don't seem to agree with are what to do with the salts. There are an infinite number of techniques you can do to try to protect the salts as well, but many experts will suggest that they are just pointless obfuscation of the security model, and that over time the model will be exposed, and I find myself disagreeing with this, but I may not be understanding the other viewpoint.
What I don't understand is if your model is compromised, why should you assume a full compromise instead of a partial? If your security model is distributed across different pieces of infrastructure which aren't equally secured, a partial compromise might not even be a problem. (If you do something like, say, encrypt the salt and retrieve the encryption-key from a more highly secured environment that is less likely to be compromised)
I'm assuming that a compromise isn't always 100% here. I've never had a system hacked nor have I ever hacked so I don't have the complete picture.
The big difference between obfuscation and encryption is that what is obfuscated can be clarified without the need for anything beyond the obfuscated information - as long as you can figure out the type of data you are looking at, then you can find a way to clarify it.
Encryption, meanwhile, can only be decrypted with the right key/password/cracking tool. Encrypted data without those things is very secure.
Consequently obfuscation can at best slow down a determined attacker, although it might put off a less determined one. There are many easier and more maintainable things you can do around the security of your system and your servers to harden them against less determined attackers, so the cost of obfuscation in terms of additional work for you and your systems is rarely justified in my opinion.
To assume a compromise is not 100% when one occurs is a very risky endeavour as what you are actually assuming is that you are smarter and more aware of your system than your attacker. You may be right, but if you assume it and you are wrong then you are in very serious trouble indeed. You have to prove it, and given the problems with proving a negative it is safer to act as though you have been compromised completely when a compromise occurs and to design your systems so that they are as secure as possible even in the situation where a total compromise has occurred.
if your model is compromised, why should you assume a full compromise
instead of a partial?
You should always assume the worst case in security. This is the safest approach.
a partial compromise might not even be a problem
Perhaps. But are you really sure?
In your OP you are basing your analysis on too many assumptions. Perhaps in a very specific setup your evaluation that a partial compromise might not be a problem might be justifiable.
But then again you assume that the attacker is not good enough to find a hole.
Don't base your security model on assumptions.
Security through obscurity, is, at best, a gamble. Does it pay to store the salt somewhere else? Probably. But you have to look at the cost versus reward when you start getting into these multi-step security setups. I would say, if your application requires it, you will know it. Otherwise, adding more steps into the application for the sake of having super intense security may only give yourself headaches when things go wrong. Not everyone needs NASA level security for their systems. That isn't to say security isn't important. It's just that you need to temper it to your current environment.

.NET 3.5 - Hashing a password using System.Cryptography

I am a bit of a newbie around Security nitty gritties and especially around Cryptography.
In the application we are building(ASP.net application built on .NET 3.5), we are currently using Databases to save our users authentication information (AD etc is not an option at this point).
The intention is to do a one way salted hash of the passwords using SHA256Managed on user creation and then validate the users using the same.
Ideally, we do not want to use any third party dll's for the hashing algorithm unless absolutely necessary to avoid any unnecessary dependencies.
Questions:-
1. Is there a better option than doing a salted one way hash?
2. Is SHA256 a reasonably reliable / secure option or should we be considering anything else?
3. Is the SHA256Managed implementation in System.Cryptography good enough in terms of it speed etc or should we be considering 3rd party alternatives to it?
Any pointers as to the approach / implementation will be helpful.
I did some research on this back in the day, and the consensus was BCrypt was one of the best ways to do a one way hash.
You can see a C# implementation here: http://derekslager.com/blog/posts/2007/10/bcrypt-dotnet-strong-password-hashing-for-dotnet-and-mono.ashx
In addition, what's nice about BCrypt is you can decide how many rounds you'd like it to go through.
So, you can make it take about 1 second to encrypt for example. For a user, that's an acceptable wait time, but for someone trying to attack you through brute force, 1 second is an eternity.
I am no security expert, so take what I say here as a grain of salt. A salt you can send in to your BCrypt method :)
In addition, here's some advice from Atwood on this: http://www.codinghorror.com/blog/2007/09/youre-probably-storing-passwords-incorrectly.html
Update:
Since answering this, NuGet has made using BCrypt much easier: http://nuget.org/packages?q=bcrypt
I can't vouch for any particular implementation there, so take a look at the code, but this should make using and integrating BCrypt much easier.
Yes, retina scan (just kidding). Storing passwords as hashes with salt is the correct way.
SHA256 is good. Obviously I don't know the type of an application you are working on, but SHA256 is good for the vast majority of projects. You can always go to a higher key length (384, 512) if required. Consult with your security architect.
SHA256Managed (we are talking .net, right?) is good. We use it in our projects.
Please also consider reading this:
http://www.obviex.com/samples/hash.aspx
Yes, there's nothing wrong with SHA256 and certainly SHA256Managed will be "fast enough" for most use cases (I'm sure you're not expecting to be validating 1000s of login requests per second, and even if you were, the rest of the site would still be dwarfing the login requests...)
But have you considered the Membership stuff that's built-in to the framework? They're already done all the hard work in terms of securely storing credentials, and implementing all the support functionality as well (such as password resets, etc)
Storing password hashes with salt it correct. However, it's easy to get even that much wrong. Sure, right now SHA256 will keep the baddies at bay, but give it a few years. Suddenly, SHA256 might not seem so secure anymore. You need to use BCrypt, a future-proof hashing algorithm.
Problem with doing just one pass of SHA256 is it is too fast and one with great hardware can generate rainbow tables for lots of salts easily...to get around this you need to perform key stretching....kI'm not going to give you a lesson on key stretching but the bcrypt implementation that people talk about performs key stretching. If you want a more modern alternative to bcrypt which uses HMACSHA256 or 512 in .NET, I recomend this API:
https://sourceforge.net/projects/pwdtknet/

When can you trust yourself to implement cryptography based solutions?

I've read quite a few times how I shouldn't use cryptography if I'm not an expert. Basically both Jeff and Eric tell you the same:
Cryptography is difficult, better buy the security solution from experts than doing it yourself.
I completely agree, for a start it's incredibly difficult to perceive all possible paths an scenario might take, all the possible attacks against it and against your solution... but then When should we use it?
I will face in a few months with the task of providing a security solution to a preexisting solution we have. That is, we exchange data between servers, second phase of the project is providing good security to it. Buying a third party solution will eat up the budget anyway so ... When is it good to use cryptography for a security solution? Even if you are not a TOP expert.
Edit: To clarify due to some comments.
The project is based on data transport across network locations, the current implementation allows for a security layer to be placed before transport and we can make any changes in implementation we like (assuming reasonable changes, the architecture is well design so changes should have an acceptable impact). The question revolves around this phrase from Eric Lippert:
I don’t know nearly enough about cryptography to safely design or implement a crypto-based security system.
We're not talking about reinventing the wheel, I had in mind a certain schema when I designed the system that implied secure key exchange, encryption and decryption and some other "counter measures" (man in the middle, etc) using C# .NET and the included cryptography primitives, but I'm by no means an expert in the field so when I read that, I of course start doubting myself. Am I even capable of implementing a secure system? Would it always be parts of the system that will be insecure unless I subcontract that part?
I think this blog posting (not mine!) gives some good guidelines.
Other than that there are some things you should never do unless you're an expert. This is stuff like implementing your own crypto algorithm (or your own version of a published algorithm). It's just crazy to do that yourself! (When there's CAPI, JCE, OpenSSL, ....)
Beyond that though if you're 'inventing' anything it's almost certainly wrong. In the Coding Horror post you linked to - the main mistake to my mind is that he's doing it a very low level and you just don't need to. If you were encrypting things in Java (I'm not so familiar with .NET) you could use Jasypt which uses strong default algorithms and parameters and doesn't require you to know about ECB and CBC (though, arguably, you should anyway just because...).
There is going to be a prebuilt system for just about anything you're going to want to do with crypto. If you're storing keys then theres KeyCzar, in other cases theres Jasypt. The point is if you're doing anything 'unusual' with crypto - you shouldn't be; if you're doing something not 'unusual' then you don't need to do the crypto yourself. Don't invent a new way to store keys, generate keys from passwords, verify signatures etc - it's not necessary, it's complicated and you'll almost certainly make a mistake unless you're very very careful...
So... I don't think you necessarily need to be afraid of encrypting things but be aware that if you're specifying algorithms and parameters to those algorithms directly in your code it is probably not good. There are exceptions to any rule but as in the blog post I linked above - if you type AES into your code you're doing it wrong!
The key "take-away" from the Matasano blog post is right at the end (note that TLS is a more precise name for SSL):
THOMAS PTACEK
GPG for data at rest. TLS for data in
motion.
NATE LAWSON
You can also use Guttman's cryptlib,
which has a sane API. Or Google
Keyczar. They both have really simple
interfaces, and they try to make it
hard to do the wrong thing. What we
need are fewer libraries with higher
level interfaces. But we also need
more testing for those libraries.
The rule of thumb with cryptography isn't that you shouldn't use it if you're not an expert; rather, it's that you shouldn't re-invent the wheel unless you're an expert. In other words, use existing implementations / libraries / algorithms as much as possible. For example, don't write your own cryptographic authentication algorithm, or come up with yet another way to store keys.
As for when to use it: whenever you have data that needs to be protected from having others see it. Beyond that, it comes down to which algorithms / approaches are best: SSL vs. IPsec vs. symmetric vs. PKI, etc.
Also, a word of advice: key management is often the most challenging part of any comprehensive cryptographic solution.
You have things backwards: first you must specify your actual requirements in detail ("provide a security solution" is meaningless marketing drivel). Then you look for ways to satisfy those specific requirements; croptography will satisfy some of them.
Example of requirements that cryptography can satisfy:
Protect data sent over publich channels from spying
Protect data against tampering (or rather, detect manipulated data)
Allow servers and clients as well as users to prove their identity to each other
You need to go through the same process as for any other requirement. What is the problem being solved, what is the outcome the users are looking for, how is the solution proposed going to be supported going forward, what are the timescales involved. Sometimes there is an off the shelf solution that does the job, sometimes what you want needs to be developed as a custom solution, and sometimes you'll choose a custom solution as it will work out more cost effective than an off the shelf one.
The same is true with security requirements, but the added complexity is that to do any sort of custom solution requires additional expertise in the technical teams (development, support etc). There is also the issue that the solution may need to be not only secure but recognised as secure. This may be far easier to achieve with an off the shelf solution.
And RickNZ is absolutely right - don't forget key management. Consider this right at the outset as part of the decision making process.
The question I would start by asking, is what are you trying to achieve.
If you are trying to just secure the transmission of the data from server a to server b, then there are a number of mechanisms you could use, which would require little work, such as SSL.
However if you are trying to secure all of the data stored in the application that is a far more difficult, although if it is a requirement, then I would suggest that any cryptography, regardless of how easy to break, is better than none.
As someone who has been asked to do similar things, you face a daunting number of questions in implementing your system. There are major difference between securing a system and implementing cryptography systems.
Implementing a cryptography system is very difficult and experts routinely get it wrong, both in theory and practice. A famous theoretical failure was the knapsack cryptosystem which has been largely abandoned due to the Lenstra–Lenstra–Lovász lattice basis reduction algorithm. On the other side, we saw in the last year how an incorrect seed in Debian's random number generator opened up any key generated by the OS. You want to use a prepackaged cryptosystem, not because its an "experts-only" field, but because you want a community tested and supported system. Almost every cryptographic algorithm I know of has bounds that assume certain tasks to be hard, and if those tasks turn out to be computable (as in the LLL algorithm) the whole system becomes useless over night.
But, I believe, the real heart of the question is how to use things in order to make a secure system. While there are many libraries out there to generate keys, cipher the text, and so on, there are very few systems that implement the entire package. But as always security boils down to two concepts: worth of protection and circle of trust.
If you are guarding the Hope diamond, you spend a lot of money designing a system to protect it, employ a constant force to watch it, and hire crackers to continually try to break in. If you are just discouraging bored teenagers from reading your email, you hack something up in an hour and you don't use that address for secret company documents.
Additionally managing the circle of trust is just as difficult of a task. If your circle includes tech savvy, like-minded friends, you make a system and give them a large amount of trust with the system. If it includes many levels of trust, such as users, admins, and so on, you have a tiered system. Since you have to manage more and more interactions with a larger circle, the bugs in the larger system become more weaknesses to hack and thus you must be extremely careful in designing this system.
Now to answer your question. You hire a security expert the moment the item you're protecting is valuable enough and your circle of trust includes those you cannot trust. You don't design cryptography systems unless you do it for a living and have a community to break them, it is a full time academic discipline. If you want to hack for fun, remember that it is only for fun and don't let the value of what you are protecting get too high.
Pay for security (of which cryptography is a part but only a part) what it is worth but no more. So your first task is to decide what your security is worth, or or how much various states of security are worth. Then invite whoever holds the budget to select which state to aim for and therefore how much to spend.
No absolutes here, it's all relative.
Why buy cryptography? It's one of the most developed area in open source software of great quality :) See for example TrueCrypt or OpenSSL
There is a good chance that whatever you need cryptography for there is already a good quality, reputable open source project for it! (And if you can see the source you can see what they did; I once saw an article about a commercial software supposed to "encrypt" a file that simply xorred every byte with a fixed value!)
And, also, why would you want to re-invent the wheel? It's unlikely that with no cryptography background you will do better or even come close to the current algorithms such as AES.
I think it totally depends on what you are trying to achieve.
Does the data need to be stored encrypted at either end or does it just need to be encrypted whilst in transit?
How are you transferring the data? FTP, HTTP etc?
Probably not a good idea to have security as a second phase as by that point presumably you've been moving data around insecurely for a period of time?

Pitfalls of cryptographic code

I'm modifying existing security code. The specifications are pretty clear, there is example code, but I'm no cryptographic expert. In fact, the example code has a disclaimer saying, in effect, "Don't use this code verbatim."
While auditing the code I'm to modify (which is supposedly feature complete) I ran across this little gem which is used in generating the challenge:
static uint16 randomSeed;
...
uint16 GetRandomValue(void)
{
return randomSeed++;/* This is not a good example of very random generation :o) */
}
Of course, the first thing I immediately did was pass it around the office so we could all get a laugh.
The programmer who produced this code knew it wasn't a good algorithm (as indicated by the comment), but I don't think they understood the security implications. They didn't even bother to call it in the main loop so it would at least turn into a free running counter - still not ideal, but worlds beyond this.
However, I know that the code I produce is going to similarly cause a real security guru to chuckle or quake.
What are the most common security problems, specific to cryptography, that I need to understand?
What are some good resources that will give me suitable knowledge about what I should know beyond common mistakes?
-Adam
Don't try to roll your own - use a standard library if at all possible. Subtle changes to security code can have a huge impact that aren't easy to spot, but can open security holes. For example, two modified lines to one library opened a hole that wasn't readily apparent for quite some time.
Applied Cryptography is an excellent book to help you understand crypto and code. It goes over a lot of fundamentals, like how block ciphers work, and why choosing a poor cipher mode will make your code useless even if you're using a perfectly implemented version of AES.
Some things to watch out for:
Poor Sources of Randomness
Trying to design your own algorithm or protocol - don't do it, ever.
Not getting it code reviewed. Preferably by publishing it online.
Not using a well established library and trying to write it yourself.
Crypto as a panacea - encrypting data does not magically make it safe
Key Management. These days it's often easier to steal the key with a side-channel attack than to attack the crypto.
Your question shows one of the more common ones: poor sources of randomness. It doesn't matter if you use a 256 bit key if they bits aren't random enough.
Number 2 is probably assuming that you can design a system better than the experts. This is an area where a quality implementation of a standard is almost certainly going to be better than innovation. Remember, it took 3 major versions before SSL was really secure. We think.
IMHO, there are four levels of attacks you should be aware of:
social engineering attacks. You should train your users not to do stupid things and write your software such that it is difficult for users to do stupid things. I don't know of any good reference about this stuff.
don't execute arbitrary code (buffer overflows, xss exploits, sql injection are all grouped here). The minimal thing to do in order to learn about this is to read Writing Secure Code from someone at MS and watching the How to Break Web Software google tech talk. This should also teach you a bit about defense in depth.
logical attacks. If your code is manipulating plain-text, certificates, signatures, cipher-texts, public keys or any other cryptographic objects, you should be aware that handling them in bad ways can lead to bad things. Minimal things you should be aware about include offline&online dictionary attacks, replay attacks, man-in-the-middle attacks. The starting point to learning about this and generally a very good reference for you is http://www.soe.ucsc.edu/~abadi/Papers/gep-ieee.ps
cryptographic attacks. Cryptographic vulnerabilities include:
stuff you can avoid: bad random number generation, usage of a broken hash function, broken implementation of security primitive (e.g. engineer forgets a -1 somewhere in the code, which renders the encryption function reversible)
stuff you cannot avoid except by being as up-to-date as possible: new attack against a hash function or an encryption function (see e.g. recent MD5 talk), new attack technique (see e.g. recent attacks against protocols that send encrypted voice over the network)
A good reference in general should be Applied Cryptography.
Also, it is very worrying to me that stuff that goes on a mobile device which is probably locked and difficult to update is written by someone who is asking about security on stackoverflow. I believe your case would one of the few cases where you need an external (good) consultant that helps you get the details right. Even if you hire a security consultant, which I recommend you to do, please also read the above (minimalistic) references.
What are the most common security problems, specific to cryptography, that I need to understand?
Easy - you(1) are not smart enough to come up with your own algorithm.
(1) And by you, I mean you, me and everyone else reading this site...except for possibly Alan Kay and Jon Skeet.
I'm not a crypto guy either, but S-boxes can be troublesome when messed with (and they do make a difference). You also need a real source of entropy, not just a PRNG (no matter how random it looks). PRNGs are useless. Next, you should ensure the entropy source isn't deterministic and that it can't be tampered with.
My humble advice is: stick with known crypto algorithms, unless you're an expert and understand the risks. You could be better off using some tested, publicly-available open source / public domain code.

Why is security through obscurity a bad idea? [closed]

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I recently came across a system where all of the DB connections were managed by routines obscured in various ways, including base 64 encoding, md5sums and various other techniques.
Why is security through obscurity a bad idea?
Security through obscurity would be burying your money under a tree. The only thing that makes it safe is no one knows it's there. Real security is putting it behind a lock or combination, say in a safe. You can put the safe on the street corner because what makes it secure is that no one can get inside it but you.
As mentioned by #ThomasPadron-McCarty below in a comment below:
If someone discovers the password, you can just change the password, which is easy. If someone finds the location, you need to dig up the money and move it somewhere else, which is much more work. And if you use security by obscurity in a program, you would have to rewrite the program.
Security through obscurity can be said to be bad because it often implies that the obscurity is being used as the principal means of security. Obscurity is fine until it is discovered, but once someone has worked out your particular obscurity, then your system is vulnerable again. Given the persistence of attackers, this equates to no security at all.
Obscurity should never be used as an alternative to proper security techniques.
Obscurity as a means of hiding your source code to prevent copying is another subject. I'm rather split on that topic; I can understand why you might wish to do that, personally I've never been in a situation where it would be wanted.
Security through obscurity is an interesting topic. It is (rightly) maligned as a substitute for effective security. A typical principle in cryptography is that a message is unknown but the contents are not. Algorithms for encyrption are typically widely published, analyzed by mathematicians and, after a time, some confidence is built up in their effectivness but there is never a guarantee that they're effective.
Some people hide their cryptographic algorithms but this is considered a dangerous practice because then such algorithms haven't gone through the same scrutiny. Only organisations like the NSA, which has a significant budget and staff of mathematicians, can get away with this kind of approach.
One of the more interesting developments in recent years has been the risk of steganography, which is the practice is hiding message in images, sound files or some other medium. The biggest problem in steganalysis is identifying whether or not a message is there or not, making this security through obscurity.
Last year I came across a story that Researchers Calculate Capacity of a Steganographic Channel but the really interesting thing about this is:
Studying a stego-channel in this way
leads to some counter-intuitive
results: for example, in certain
circumstances, doubling the number of
algorithms looking for hidden data can
increase the capacity of the
steganographic channel.
In other words, the more algorithms you use to identify messages the less effective it becomes, which goes against the normal criticism of security through obscurity.
Interesting stuff.
The main reason it is a bad idea is that it does not FIX the underlying problems, just attempts to hide them. Sooner or later, the problems will be discovered.
Also, extra encryption will incur additional overhead.
Finally excessive obscurity (like using checksums) makes maintenance a nightmare.
Better security alternatives is to eliminate potential weaknesses in your code such as enforced inputs to prevent injection attacks.
One factor the ability to recover from a security breach. If someone discovers your password, just reset it. But if someone uncovers your obscure scheme, you're hosed.
Using obscurity as all these people agree is not security, its buying yourself time. That said having a decent security system implemented then adding an extra layer of obscurity is still useful. Lets say tomorrow someone finds an unbeatable crack/hole in the ssh service that can't be patched immediately.
As a rule I've implemented in house... all public facing servers expose only the ports needed ( http/https ) and nothing more. One public facing server then will have ssh exposed to the internet at some obscure high numbered port and a port scanning trigger setup to block any IP's that try to find it.
Obscurity has its place in the world of security, but not as the first and last line of defense. In the example above, I don't get any script/bot attacks on ssh because they don't want to spend the time searching for a non-standard ssh service port and if they do, their unlikely to find it before another layer of security steps in and cuts them off.
All of the forms of security available are actually forms of security through obscurity. Each method increases in complexity and provides better security but they all rely on some algorithm and one or more keys to restore the encrypted data. "Security through obscurity" as most call it is when someone chooses one of the simplest and easiest to crack algorithms.
Algorithms such as character shifting are easy to implement and easy to crack, that's why they are a bad idea. It's probably better than nothing, but it will, at most, only stop a casual glance at the data from being easily read.
There are excellent resources on the Internet you can use to educate yourself about all of the available encryption methods and their strengths and weaknesses.
Security is about letting people in or keeping them out depending on what they know, who they are, or what they have. Currently, biometrics aren't good at finding who you are, and there's always going to be problems with it (fingerprint readers for somebody who's been in a bad accident, forged fingerprints, etc.). So, actually, much of security is about obfuscating something.
Good security is about keeping the stuff you have to keep secret to a minimum. If you've got a properly encrypted AES channel, you can let the bad guys see everything about it except the password, and you're safe. This means you have a much smaller area open to attack, and can concentrate on securing the passwords. (Not that that's trivial.)
In order to do that, you have to have confidence in everything but the password. This normally means using industry-standard crypto that numerous experts have looked at. Anybody can create a cipher they can't break, but not everybody can make a cipher Bruce Schneier can't break. Since there's a thorough lack of theoretical foundations for cipher security, the security of a cipher is determined by having a lot of very smart and knowledgeable people try to come up with attacks, even if they're not practical (attacks on ciphers always get better, never worse). This means the crypto algorithm needs to be widely known. I have very strong confidence in the Advanced Encryption Standard, and almost none in a proprietary algorithm Joe wrote and obfuscated.
However, there's been problems with implementations of crypto algorithms. It's easy to inadvertantly leave holes whereby the key can be found, or other mischief done. It happened with an alternate signature field for PGP, and weaknesses with SSL implemented on Debian Linux. It's even happened to OpenBSD, which is probably the most secure operating system readily available (I think it's up to two exploits in ten years). Therefore, these should be done by a reputable company, and I'd feel better if the implementations were open source. (Closed source won't stop a determined attacker, but it'll make it harder for random good guys to find holes to be closed.)
Therefore, if I wanted security, I'd try to have my system as reliable as possible, which means as open as possible except for the password.
Layering security by obscurity on top of an already secure system might help some, but if the system's secure it won't be necessary, and if it's insecure the best thing is to make it secure. Think of obscurity like the less reputable forms of "alternative medicine" - it is very unlikely to help much, and while it's unlikely to hurt much by itself it may make the patient less likely to see a competent doctor or computer security specialist, whichever.
Lastly, I'd like to make a completely unsolicited and disinterested plug for Bruce Schneier's blog, as nothing more than an interested reader. I've learned a lot about security from it.
One of the best ways of evaluating, testing or improving a security product is to have it banged on by a large, clever peer group.
Products that rely for their security on being a "black box" can't have the benefit of this kind of test. Of course, being a "black box" always invites the suspicion (often justified) that they wouldn't stand up to that kind of scrutiny anyway.
I argued in one case that password protection is really security through obscurity. The only security I can think of that wouldn't be STO is some sort of biometric security.
Besides that bit of semantics and nit picking, STO (Security through obscurity) is obviously bad in any case where you need real security. However, there might be cases where it doesn't matter. I'll often XOR pad a text file i don't want anyone reading. But I don't really care if they do, i'd just prefer that it not be read. In that case, it doesn't matter, and an XOR pad is a perfect example of an easy to find out STO.
It is almost never a good idea. It is the same to say, is it a good idea to drive without seatbelt? Of course you can find some cases where it fits, but the anwser due to experience seems obvious.
Weak encryption will only deter the least motivated hackers, so it isn't valueless, it just isn't very valuable, especially when strong encryption, like AES, is available.
Security through obscurity is based on the assumption that you are smart and your users are stupid. If that assumption is based on arrogance, and not empirical data, then your users- and hackers-- will determine how to invoke the hidden method, bring up the unlinked page, decompile and extract the plain text password from the .dll, etc.
That said, providing comprehensive meta-data to users is not a good idea, and obscuring is perfectly valid technique as long as you back it up with encryption, authorization, authentication and all those other principles of security.
If the OS is Windows, look at using the Data Protection API (DPAPI). It is not security by obscurity, and is a good way to store login credentials for an unattended process. As pretty much everyone is saying here, security through obscurity doesn't give you much protection.
http://msdn.microsoft.com/en-us/library/ms995355.aspx
http://msdn.microsoft.com/en-us/library/ms998280.aspx
The one point I have to add which hasn't been touched on yet is the incredible ability of the internet to smash security through obscurity.
As has been shown time and time again, if your only defense is that "nobody knows the back door/bug/exploit is there", then all it takes is for one person to stumble across it and, within minutes, hundreds of people will know. The next day, pretty much everyone who wants to know, will. Ouch.

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