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Passwords don't work, and they never really have

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The first computer passwords may have been used at MIT, and as Wired found out they weren't very good then either.

Password
Password

Passwords clearly don't work all that well — everywhere we turn we hear stories from Sony, Zappos, Square Enix, and many others about passwords being compromised and hacked. But where do they come from? Wired investigated the subject, and found that the idea of computer passwords may have originated at MIT, on its Compatible Time-Sharing System. Since multiple people were using a single computer, passwords allowed them to differentiate one user from another. But even then, the MIT team knew passwords weren't secure — they toyed with the idea of using a question-based authentication system, so instead of typing a password you'd be asked a question only you could answer, but decided against it because of the resources required to store all of that personal data. So, in sum, our passwords are terrible because computers in the 60's had tiny hard drives. Hit the source for the full piece, which also includes what may have been the first computer security breach.