Here's a slightly older post from Troy Hunt about passswords resets. Everything still applies today but the article does not discuss any other and possibly safer ways how to deliver the reset links to users.
Details on the event website
August 5, 2015, Passwords15 Crypto Track BSides Las Vegas (video)
Talk about password resets, users, best practices, and better future. Free speaker notes!
Users forget their passwords because they are told to remember them and that's hard. Did you ever forget your password? See, apps need to have resets.
Password reset mechanisms can also be good for the security of the user accounts. Jabbim is a Jabber/XMPP server run by a Czech company. Unfortunately they did not have automated password resets when they needed it the most.
In December 2014 they suffered a breach and the attacker accessed 125k passwords stored in plaintext, though Jabbim had their reasons for plaintext, like performance and legacy client support. Data segmentation was also missing, but let's move on. The leak wasn't made public, but the bad guy tried to sell it for a bitcoin or two.
The issue is that Jabbim doesn't have automated password resets because they don't require users to enter email address during sign-up, so Jabbim can't send a reset link. Their password reset mechanism is manual and that doesn't scale well.
Jabbim could reset passwords immediately for all their users and send them reset links via email, but this is what they did instead. Some of my friends lost access to their Jabber accounts because somebody has changed their password before they were able to read the blog post suggesting them to change their passwords. They've eventually left the service because of “poor security practices.”
If an email address is not mandatory during sing-up it should be at least optional and the benefits of adding one should be clearly stated. Breaches happen. Loosing an account just because of one is another thing.
What are the benefits of adding an email? When something bad happens with one's account or if the user forgets their password the service provider can send a link with a random token to the email address provided and the user can set new password once they click the link.
The link should be random random, not just random, not time based, not a hash of something, should expire in few hours max so that the chance of an attacker using a leaked token is limited. The link should be usable only once for the same reason.
Hash the token with SHA-512 before storing it in a database. It doesn't need to be a slow hash like bcrypt, because the token has a high entropy already and is limited in time anyway.
The email with the reset link should also contain option to invalidate the token to minimize the chance of an attacker gaining access to a valid link and reset user's password. It should be also nice to include the IP address and the city from where the request originated so that the user can tell if it was them or somebody else.
Sometimes, the bad guys use this password reset feature to see whether their neighbor has been using the service as well so it might not be a good idea to provide more information than needed, especially if you're running a dating site for example. Most of the times it does not really matter because it's possible to use sign-up flow to see whether the address is already registered with the site or not. It's also important to limit the number of attempts to access password resets.
Don't generate and email new password. I've seen a site which always generated new 5 characters long password, upper and lowercase letters only. In that case, someone's strong password could be easily downgraded to a short one by just using the password reset feature. Last but not least, don't send the original password. You can't, you don't even know it because it's properly hashed, right?
This should be old news for every developer but obviously it's not. One of the more interesting ways of doing a password reset was this. The token was an encrypted user email address which got decrypted when sent back and then used to find the user. That would be fine but the site was leaking source code and encryption keys too, so it was possible to reset password for anybody. Just use a random token, seriously.
The bad thing about email is shown above. Roughly half of the email traffic is not encrypted as of August 2015. So even if the web app runs on HTTPS and the reset link is also HTTPS there's still quite a high chance that anybody with some leet skills can read the link while in transit. That's not what I'd call a secure password reset.
You can use starttls.info or ssl-tools.net to see whether your email traffic is encrypted and how good the encryption is. It's sort of like SSL Labs Server Check for email. And even if you score grade A, it's still not end-to-end encryption, just between servers, so your provider can still read your emails. Your account is essentially protected by DNS. Someone can just hack your DNS servers and change the MX records and reset links will go elsewhere. It's similar to SMS, that's not secure much either.
Facebook did this to work around insecure email. They allow you to upload your PGP public key and then they will encrypt all the notifications they send to you, including password reset links. Even if you probably won't use the password reset feature because you use a password manager (right?) then this makes it impossible for the attacker to reset your password even if they have access to the message with the reset link because that is encrypted with your public key and only you can decrypt it.
Other option of doing end-to-end encryption to deliver the links securely could be the OTR library. It's supported out-of-the-box on numerous instant messengers and has plugins for few others. It can be used from eg. Node.js, Python, Go, and Java. Your users would need to be “friends” with your app and once they are the app can send the reset links securely to their instant messenger.
Or you can just let users disable password resets completely. Just make sure you get the messaging around that right, suggest using a password manager for example.
Ideally, the app would let the users select preferred method of delivering the HTTPS password reset link. More transports could be added, but some common ones do not support automated sending very well or at all, like Skype for example.
One thing the apps should definitely do is to notify the users when they or someone else have changed their password. Again, clear copy is crucial. Might also be interesting to require password change verification similar to two-step verification or two-factor authentication, but I'm not sure yet how to handle cases like when the device is lost etc.
One last thing, when users forget their password just don't store the failed attempts. Once the database leaks the correct password can be recovered easily, here the password was
Password1. Remember, think beyond just emailing links to people.