How does Terraform handle sensitive variables?

Terraform manages sensitive variables securely by utilizing environment variables. When sensitive information, such as passwords or API keys, is required in a Terraform configuration, it is best practice to avoid hard-coding these values directly into the configuration files or storing them in plain text. Instead, users can define these sensitive variables through environment variables, which helps to keep them out of the source code and reduces the risk of accidental exposure.

Using environment variables allows for better security and management of sensitive data because these values are not stored alongside the configuration files or in plain text state files. This approach aligns with the principles of Infrastructure as Code, emphasizing the separation of configurations and sensitive data.

In contrast, including sensitive information directly in configuration files or storing them in plain text within your state file can lead to inadvertent exposure when sharing code or state files. Likewise, including them in version control can lead to security risks, as version control systems typically archive all content, including sensitive data. Thus, managing sensitive variables through environment variables is the recommended approach for maintaining security and ensuring best practices.