You make great points, but just as a point of clarification (because I saw numerous people confused by this yesterday), this is merely nomenclature, no? What you are calling a key is really a long, random password (in Amazon's case the secret Access key).
A good password is a long string of random characters, and an API key is a long string of random characters, but they are not the same because the semantics are different. Passwords are typically chosen by customers, changed (let's be honest) very rarely and on a haphazard schedule, often reused across a bunch of different systems no matter how frantically we wave our hands, and (most important of all) have "user" semantics and scope: a password lets a user log in and do logged-in-user stuff.
Whereas an API key can be issued by the system, and is thereby guaranteed (assuming a clueful programmer) to be long and random and unique and not shared with the customer's Gmail account and bank account. You can expire it often. You can issue more than one per customer. (With passwords, this is theoretically possible but practically impossible; customers barely understand how to handle one password.) You can issue it to entities that aren't themselves customers, and that don't have "user" semantics. You can scope it to particular uses, issuing a key that is only good for checking balances but not for initiating transactions, for example.
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[1] The other being cache coherency. And avoiding off-by-one errors when enumerating lists.
If someone gets a list of unencrypted (or poorly encrypted) passwords, they have the rights of the user. If someone gets a list of unencrypted (or poorly encrypted) keys, they have the rights of the API caller. The concerns seem identical.
The difference is that you can, and should, rotate your API keys automatically and fairly frequently (I will leave it to experts to tell us how frequently is prudent.)
Moreover, when you think your DB has been compromised you can flush all the API keys and reissue them. Depending on the application this may be more or less of a pain for the customers, but at least it is possible, because the keys are random and generated by you and not shared across services.
These facts mean that API keys, properly implemented, have a much smaller attack surface. You need not worry, for example, that a three-year-old backup file that someone harvested out of the trash at your ISP has valid API keys on it. The window for attack is, in fact, limited to "someone has stolen a very fresh copy of my live DB, but I have not yet realized it, and there is still something valuable left to compromise other than the data in my app's live DB." And this window often isn't very important. Often, closing it is akin to reinforcing the barn door after the horse has bolted and the barn has burned to the ground.
Passwords, on the other hand, get reused. You are using bcrypt to hash passwords not just to protect your app, but to protect your customer Gmail accounts that share the same password.
Since this API key is embedded within their app it'll require a programmer to change (and customers often may be non technical with sites built on contract). These are things you dont want to force customers to change with any frequency as it can cause pain and expense. You dont want to ever be forced to flush all your API keys, it could be a serious disaster.
Now there's protocols that rollover access keys hourly or the like such as OAuth a but that's a complex and often unnecessary use case that's beyond most API implementors. See how Google does OAuth 2.0 with their APIs for an example.
Since it's secure, simple and performant to hash API keys stored in your DB and just compared hashed values for authentication why would you ever not want to do it?
The correct next step after discovering that you may have lost custody of API key information is to ensure that the keys are worthless, not to scramble to try to protect the keys.
This is another reason you want to be clear about the difference between a "key" and a "password", because passwords are sticky. A benefit of working with keys is that they are not; you can zorch a key with minimal provocation.
I dont see any reason to continue the argument. It's clear to me that you should hash your API keys in your DB.
What am I missing?
Also, I'd say that a SHA256 hash of a 256-bit key is hardly a "half-measure". Nothing short of compromising your RNG or SHA2 will make those hashes useful to authenticate.
https://www.pcisecuritystandards.org/documents/pci_dss_v2.pd...
See section 8.5.9 for the password change policy. Section 3.6.4 for the key rollover policy (which references NIST 800-57 that basically says 1-3 years for most keys.
There's other standards (such as the 1-5 years for an SSL certificate from the issuer) and tons of best practices out there. In short you should be rolling over keys and expiring passwords on some sort of schedule. My point was that because humans use passwords they are conventionally seen as needing quicker expiration than keys.
There are lots of organizations with notions about passwords and keys and ciphers, etc. However in the context of this discussion I don't believe there is anything that could be considered a standard.
> this is merely nomenclature, no? What you are calling a key is really a long, random password
Both passwords and keys are shared secrets. A password is a secret a human remembers, and can prove he/she remembers. A key is something a machine stores and can prove it has.
(Actually, an API key can also be a token, eg: "{ hash: " + hash(key+salt+date(now))+"valid from: " + date(now) + "salt: " + salt + "}" -- that is -- if you know the key, you can verify that that the token is indeed valid from the date claimed (and you could add serial numbers and other stuff as well). Note that the user doesn't need to know the key in this case, the user only needs a copy of the token).
So yes, it is nomenclature, but it matters.
[edit: formatting, typo]