>> Smartcards exist to keep private keys safe(r) from being stolen. 
>> They do a pretty good job of that.  But when we expect smartcards 
>> to be able to somehow make a compromised environment safe to 
>> operate in, then we've crossed the line and turned them into magic 
>> crypto fairy dust.
> 
> Yes, but maybe you are missing an interesting point...

You're changing the subject slightly.  :)  The thread is about letting a
legitimate user continue to safely use the system; you're talking about
limiting the damage an attacker can do.  The two are related but different.

The idea might be good for damage mitigation; but for permitting
continued normal operation, it's IMO a non-starter on every level.

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