I see many guides on the internet advocating a LiveCD for security – not specific distros, not a LiveUSB, just “Use a LiveCD for your online banking to protect yourself.” I’m going to highlight exactly why they aren’t just useless for security but actually detrimental in some situations.
Most LiveCDs Are Not Built For Security
Most distros provide a LiveCD as a way to test out the system. They are not designed for security nor to they make any attempt to be more secure than a default installation, in fact they explicitly make no attempt to do so because they want users to get exactly the same experience as a default insallation.
Just because you’re running from a CD does not mean an attacker is limited to that CD. Most LiveCDs will give full rights to the hard drive and all devices.
On top of that most LiveCDs will run either with Root by default or with a default root password or no root password at all meaning that an attacker can gain root without even trying.
LiveCDs Necessitate Dangerous Sessions
If you’re using a LiveCD for security it’s probably for banking or some such thing. A sensitive session. So while the argument for a LiveCD is that persistence isn’t possible (except on most it is, but this applies to all LiveCDs) it’s entirely unimportant. If a hacker gains access to your LiveCD session they’re gaining access to everything they need. Even if you shut off right after the session and the hacker wasn’t able to install to the drive you’re still screwed because they don’t care about persistence.
LiveCDs don’t make this more dangerous, it’s just a false sense of security because persistence is not the only goal and in the case of a LiveCD session it’s pretty unimportant.
LiveCDs Can Not Update
If I burn my LiveCD a month ago there’s a month of vulnerabilities in it. My only option is to burn a new CD every time a patch comes out, which is costly and ineffective. I can use a LiveUSB, which solves this issue to a large extent though.
False Sense Of Security
Because people think that persistence matters and that Linux is unhackable and that running from a CD will break access to devices they put faith into a broken idea. A false sense of security is going to do serious damage because a user will think they can go onto an insecure network with a LiveCD or not worry about other issues.
So if you really want security a LiveCD is not the way to go. LiveUSBs solve pretty much all of these issues when used with the right distro so I suggest you look into that. Leave LiveCDs for testing distros and saving Windows.
Most of this also applies to VMs actually but it gets more complicated with them.