[Disclosure: I work for AgileBits, the makers of 1Password] We've talked about this several times, most recently was in June. Please see https://blog.agilebits.com/2015/06/17/1password-inter-proces... This falls into the question of what can we do to prevent attacks from malicious processes running on the user's machine. For the most part, we do try to defend against something where we can. For example, we take steps…
It's likely that I'm misunderstanding things here, but here's what I'm imagining:
* I use 1Password and presume that my plaintext password stays on my machine.
* I use HTTPS for traffic that I care to secure.
* I contract to a vendor, with whom I don't share trusted information, to provide a dumb (non-VPS) shell, which I use for a variety of purposes.
* Among these, I use a SOCKS proxy to VPN traffic for some reason (say, to circumvent state censorship). Again, I presume that the vendor in question can't read my HTTPS traffic or 1Password info.
Can't the vendor in this case, who presumably has root on the machine in question, now sniff the loopback and find my passwords?
If the answer is "yes," then it breaks the workflow of trustless use of a SOCKS proxy.