Earlier quoted context omitted.
> with secrets possibly baked into source please don't suggest this. The right way is to have the creds fetched from a vault, which is programmed to release the creds auth-free to your VM (with machine level identify managed by the parent platform) This is how Google Secrets or AWS Vaults work.
This is just another layer of indirection (which isn't bad; it adds to the difficulty of executing a breach). The fundamental problem with encrypted secrets is that at some point you need to access and decrypt them.
For example, it is possible to create a vault lease for exactly one CI build and tie the lifetime of secrets the CI build needs to the lifetime of this build. Practically, this would mean that e.g. a token, some oauth client-id/client-secret or a username/password credential to publish an artifact is only valid while the build runs plus a few seconds. Once the build is done, it's invalidated and deleted, so exfiltration is close to meaningless.
There are two things to note about this though:
This means the secret management has to have access to powerful secrets, which are capable of generating other secrets. So technically we are just moving goal posts from one level to another. That is fine usually though - I have 5 vault clusters to secure, and 5 different CI builds every 10 minutes or so, or couple thousand application instances in prod. I can pay more attention to the vault clusters.
But this is also not easy to implement. It needs a vault cluster, dynamic PostgreSQL users take years to get right, we are discovering how applications can be terrible at handling short-lived certificates every month (and some even regress. Grafana seems to have with PostgreSQL client certs in v11/v12), we've found quite a few applications who never thought that certs with less than a year of lifetime even exists. Oh and if your application is a single-instance monolith, restarting to reload new short-lived DB-certs is also terrible.
Automated, aggressive secret management and revocation imo is a huge problem to many secret exfiltration attacks, but it is hard to do and a lot of software resists it very heavily on many layers.