That's what they claim. And maybe that's what they really intended to do, but a single bug can help a potential hacker to read my data.
The problem is, that those hackers are more likely to attack one cloud with the data, than thousands of single peoples devices.
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Yes that is very true. The goal here is to get the average person to have better password management. While using a service like lastpass is not ideal it in leaps and bounds better than what most people are doing.