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Though if people were really to move towards encrypted mail, it'd threaten the whole webmail industry. It does no good to encrypt your mail if it's then sent in plain text over the web. Even if you used https, it's a little nonsensical to let a third party decrypt your mail and then re-encrypt it for transmission.

That said, I'd bet that this threatens encrypted mail more than webmail. Have consumers ever chosen security over convenience?

I don't know what's going to happen to encrypted mail, but I can answer your last question.

Burned once, consumers will choose security over convenience. They'll even go so far as to choose inconvenience on the assumption that it makes them safer. Witness people's acceptance of inconvenient airport security, even as baggage went on totally unscreened.

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