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If we want the services provided by Linux, we have to run it somewhere either as host or guest. I have no basic issues with the Qubes+Xen virtual model; its robust in practice and clear-headed in concept. Feature-rich kernels are good to have if they run as guests.
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A guest being compromised is still a problem even when it's isolated from the rest of the system. The security of the guests still matters and the Linux kernel is large part of their attack surface and is the weak link for sandboxes they have internally like the Chromium sandbox.
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But then we're talking about sandboxes within sandboxes. Qubes focuses the user's attention on the qube/vm as the tool to manage risk. And I say this as author of a project that aims to improve Qubes guest security:
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That doesn't resolve the issue of an application being compromised and an attacker gaining access to everything in that environment. Security against remote compromise and fine-grained containment certainly matters despite coarse-grained isolation chosen by the user higher up.
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The user doesn't need to see the internal boundaries. Security improvements not increasing complexity for the user and depending on them to go through the motions and get things right are the best ones. I can't understand the argument you're making at all.
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UI complexity has to be increased by some minimal amount to improve security, which Qubes handles rather well. Its true for anything, like messaging clients that require a verification "ritual", etc. OTOH, simplification sometimes compromises security (browsers offer examples).
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Some security improvements require increasing complexity for users, others don't. Using a memory safe language, exploit mitigations, fine-grained sandboxing within applications, better cryptographic primitives etc. doesn't increase UI complexity and improves security.
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Coarse-grained isolation defined by the user is valuable. It's complementary to defending components against remote exploitation and providing fine-grained isolation within applications. They aren't alternative approaches but rather things that go well together.