> The mashed potatoes problem was solved when a Katana SDK (the official Sega SDK for the Dreamcast) was stolen[6] by the hacking team "Utopia" in late 1999. It turned out that the scrambler was nothing more than "security through obscurity".
I doubt this was security through obscurity. Most likely, it was hard (or impossible) to burn a GD-ROM for internal testing. Thus, this mechanism was probably used to burn games onto CDR for internal testing.
I haven't seen anything that explains how scrambling and descrambling work; but it's important to understand that, at a certain level, all encryption is "security by obscurity." It just comes down to how easy or hard it is to figure out how to bypass. In this case, hacking to get ahold of the scrambler is no different than getting ahold of the private part of a key pair.
Edit:
> SEGA quickly released a DC v2 which disabled MIL-CD altogether but unfortunately damage had been done. With revenues plummeting and the PS2 ogre coming out, developers abandoned the Dreamcast and SEGA retired from the hardware manufacturing business in order to focus on software.
I also wonder if disabling this system was "the straw that broke the camel's back?" If I were a developer and it suddenly became much harder to test, I'd probably think very critically if it's "worth it" to jump through so many hoops for such a small market.