With a cleartext
known_hosts, attackers would easily know which servers you connect to. There is an article and an MIT paper about a potential ssh worm making use of a readable
known_hosts. Of course usually there are other, yet more cumbersome ways to determine your daily ssh logins, such as your shell history, that an attacker could use.
Note that you can still work with your hashed
known_hosts using the
ssh-keygen utility program:
ssh-keygen -F myhost # shows myhosts's line in the known_hosts file
ssh-keygen -l -F myhost # additionally shows myhost's fingerprint
ssh-keygen -R myhost # remove myhost's line from known_hosts
This, especially the last command, should be sufficient for 99% of cases users really need to access
known_hosts. You will lose ssh host tab completion though, of course.
Also note that the command line options to
ssh-keygen are case sensitive
There's also a relevant question at unix.SE.