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Basically, spaces are fully accessible to server admins. This is the same for spaces hosted by HappyView, as well as spaces on your PDS. If somebody has access to the database, they can read anything in your spaces.
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Unless I've misunderstood @dholms.at, the protocol: • prevents a standalone space host from forging user credentials to con my PDS host into allowing the wrong user/app to access my data (proactive) • lets me revoke credentials for appviews which overshare the data I let them access (reactive)