Why encrypt user passwords? [duplicate]

Question

Possible Duplicate:
Why aren’t original passwords stored?

Why would one store encrypted user passwords in a database, if the password is the least valuable part of the data? It doesn't seem like it would affect external attacks; setting a limited number of login attempts per day per account would be effective. It doesn't seem like it would affect internal attacks; if someone can access the passwords, they've also got access to the more valuable data in the rest of the database.

Am I missing something here? Shouldn't the entire database be encrypted using user passwords as a key for the password encryption itself to be effective?

Combined his post below with his question:

Ok, I asked the question in a bad way. Let me rephrase this.

If someone breaks into this system, the fact that they have the user's passwords is one of the least of my concerns. I'll be encrypting passwords but in my humble opinion, the other data in the database is way more valuable. Assume that if an internal attacker has that data, they don't care about the passwords.

If nothing else in the database is encrypted and everything else in the database is what an attacker actually wants, did encrypting passwords actually solve anything?

Answer 1

Because, hashing passwords will protect it from attacks from inside the organization. This way people who have access to the database won't know the user's password.

People have a habit of using the same password over and over, and so if your database is accidentally compromised, your organization isn't the one that makes the user's other accounts comprised in other organizations. Now should people do this, no, but they do, and it's a lot easier to hash the passwords, than it is to explain to your customers why someone on the inside got a hold of the passwords and caused damage to several accounts in other systems not related to yours.

If you think that this reason is too exaggerated, you might want to know that it actually happened to Jeff Atwood, Stack Overflow creator. He described how the whole Stack Overflow was compromised in his blog post "I Just Logged In As You: How It Happened".

Edit:

To further answer you question, your other sensitive data should be encrypted as well. A lot of cyber attacts are inside jobs, and I hate to say it, but you have to be paranoid about who can see what information. Anything that you deem sensitive that you don't want people to know unless they are specifically authorized to see that data, should be encrypted in the database. You are right there are times when comparing what can be stolen the password isn't that much of a concern to you. The key is "to you". It is to other people, and should be protected along with the other sensitive data in the system.