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I don't think it has any holes, but it could be inconvenient if they clear their cookies or want to use your site from a different computer. Instead of remembering one of their standard passwords, they have to dig through their email to find the link you sent them just to use your site.

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Well I'm not getting rid of standard passwords, just that it wont ask for any during registration, and the user can continue to use without until such a time as they want to set it. At least, making it more optional.

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