> Client side hashing could solve this, but almost no one does it.
That is because it doesn't solve the problem. If you implement client-side hashing and then let your engineers see what arrives from the client, they will be just as able to log in as the snooped user; the client-side hash has added nothing.
What a client-side password hash does is to conceal the user's password from the user. There are a few types of password-related attacks:
1. If I learn your password, I can log in as you.
2. If I learn your password, I can log in as you, on other sites where you use the same password (and I can find your account, perhaps because you also use the same username or email address).
3. If I learn your hashed password, I can try to crack it.
4. If I dump the site's hashed password database, I can learn who else has the same password as you. (Because the hashes are the same.) Cracking one of them will crack everyone else's -- efficiency!
I might learn your password in a few different ways. Maybe it's "ncc1701d". Maybe I snooped your network traffic. Maybe I found the hash and cracked it.
So what are the solutions?
#1. There is no solution; this is working as intended. That said, HTTPS operates in this area, by making it more difficult for people to learn your passwords by snooping your network traffic.
#2. You, the user, would have to use different passwords for different accounts.
#3. I, the website operator, should process your password with a hashing function that is tuned to be slow.
#4. I, the website operator, should salt the passwords so that two identical passwords on two different accounts on my site produce different salted hashes.
Hashing the password on the client side and sending the hash over the wire does not address attacks 1, 3, or 4. They all work just as well regardless. It might show up if I try to perform attack #2.
This attack involves me (1) learning your password on one site, and then (2) using it to log in to your account on a second site. We will compare strategy (A) -- you enter your password, the site hashes it on your side, an intermediate hash is transmitted to the server, the server hashes it again, and finally the server stores the final hash in a database -- with strategy (B): you enter your password, the site transmits it in plain text to the server, the server hashes it, and finally the server stores the hash in a database.
In strategy (A), you have three passwords, plaintext, intermediate, and final; for purposes of parallelism, the same is true in strategy (B), except that your intermediate password is identical with your plaintext password.
In the case where I learn your final hashed password by dumping the site's database, there is no difference. In both cases, I will attempt to crack that password by guessing a likely password and running it through the hashing process.
In the case where I learn your plaintext password, there is also no difference. That's just attack #1.
In the case where I learn your intermediate password, perhaps by snooping network traffic or server logs, I can immediately perform attack #1 against your account on the particular site, because -- for purposes of that site only -- I have learned your plaintext password. I can also perform attack #3, cracking your hashed password, against your accounts on any and all other websites. But, in strategy (A), I cannot immediately perform attack #2 -- my attempt to crack your password would have to succeed first. If you have a weak password, it will. If you have a strong password, it probably won't.
This is very weak tea, which is why, working as a security consultant, we considered the defense you describe, "passing the hash", to be a red flag, and always recommended against it.
In the case being discussed here, where Facebook is explicitly worried about engineers viewing users' Facebook accounts, as opposed to their eBay accounts, client-side hashing has literally nothing to add.