Securing HCP Terraform Infrastructure with Vault-Backed Dynamic Credentials: Here's Why

Many Terraform users still rely on static credentials (API keys, passwords, certificates, etc.) to authenticate workloads with cloud providers like AWS, Google Cloud, and Azure. However, this practice introduces both operational and security challenges. Managing static, long-lived credentials doesn’t scale well without tedious and time-consuming manual intervention. Additionally, setting credentials as workspace variables or variable sets in Terraform adds extra complexity to the authentication process.

Manually securing static secrets increases the risk of secrets leakage and secrets sprawl, where credentials end up scattered across multiple databases, clouds, and applications.

HashiCorp Vault offers a secure and centralized repository for storing these secrets, eliminating the need to hardcode them within Terraform configurations. Vault also provides management and control over identity access management (IAM) policies that applications need to interact with other applications and services. Using an API-first approach to authenticate all requests, Vault ensures secure access to authorized resources only.

One of the key features Vault offers to HCP Terraform users is Vault-backed dynamic credentials. This feature enables the auto-generation and revocation of secrets/credentials when they are no longer needed.

This blog will explain why securing your infrastructure with dynamic secrets through Vault-backed dynamic credentials is the most secure way to use Terraform and why it should be the new standard for your security roadmap.

Vault-backed dynamic credentials ?

Vault-backed dynamic credentials are temporary, time-bound, and unique to each Terraform workload. When you adopt HashiCorp Vault as your secrets manager, Vault’s secrets engines can connect with HCP Terraform and Terraform Enterprise’s dynamic provider credentials feature to generate and manage dynamic credentials directly from Vault.

The dynamic provider credentials feature automatically generates the API keys you need to access and build infrastructure for AWS, Microsoft Azure, and Google Cloud. It does this just-in-time with each provisioning run for one-time use. These dynamic credentials do not require manual rotation or revocation when they are no longer needed.

By making credentials unique and used for one run only, teams drastically reduce the chance that they might be found by attackers, and eliminate the chance of long-term malicious access.

Standards-based

Drilling down into the security details of this feature, Vault-backed dynamic credentials strongly protect access workflows during infrastructure provisioning by leveraging workload identity and the OpenID Connect (OIDC) standard. Before provisioning, operators must first configure Terraform as a trusted identity provider with Vault (or their cloud infrastructure providers in the case of basic dynamic provider credentials). HCP Terraform or Terraform Enterprise then generate a signed identity token for every workload to obtain single-run credentials that are injected into the run environment. This exchange happens automatically for the supported providers by adding a few simple environment variables to the workspace.

Why use Vault-backed dynamic credentials?
Vault-backed dynamic credentials include several advantages over using only dynamic provider credentials without Vault:

Consolidated management and auditing for all your cloud credentials and other secrets
No OIDC setup required in your cloud provider
Leverage Vault secrets engine configurations
No need to expose inbound access to self-hosted Terraform Enterprise instances from cloud providers to validate OIDC metadata.

Management and Auditing

Dynamic provider credentials represent progress toward more secure secrets management compared to static credentials. However, without being “Vault-backed,” these credentials lack robust auditing and management capabilities. Secrets management falls within Vault's domain, while Terraform focuses on provisioning. Using Vault-backed dynamic credentials allows teams to consolidate Terraform credential management with all other organizational secrets on a single platform.

Dynamic credentials are most effectively utilized within a secrets management platform like HCP Vault Dedicated, which automates their lifecycle. HCP Vault Dedicated can automatically generate temporary secrets as needed and seamlessly integrate dynamic secrets into infrastructure automation tools such as HCP Terraform.

No OIDC setup required in cloud provider

By setting up an OIDC flow from HCP Terraform to Vault instead of a cloud provider, teams can own the full security lifecycle process from authentication to secret generation. This lets teams use the more sophisticated feature set of Vault when managing dynamic provider credentials and reduce the surface area of security configurations required for all workloads.

Utilize Vault Secrets Engine Configurations

Vault-backed dynamic credentials leverage Vault’s authentication and authorization capabilities to limit permissions based on metadata like the execution phase, workspace, or organization involved in the operation. Security teams already well-versed in configuring Vault policies and mapping workloads to cloud roles can use their existing workflows to authorize Terraform runs, saving time and effort.

Another security benefit of Vault-backed dynamic credentials is the Vault token, which is revoked immediately after the plan or application runs. This means the cloud credentials are also immediately invalidated and cannot be re-used, as opposed to waiting for a fixed time-to-live to expire.

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Securing HCP Terraform Infrastructure with Vault-Backed Dynamic Credentials: Here's Why

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