Hello.
I'm setting up a web service which will only be used by a limited number (< 100) of known agents (business partners etc.).
Because I am not public facing, do I face any real downside to using self-issued certs as opposed to the much more costly route of using a known CA?
Edit: I should clarify that the primary purpose we hope to get out of the certificates is to fulfil the 2nd factor in two-factor authentication (password for what-you-know, X.509 cert for what-you-have)
With a self-signed cert, the users will be warned that the certificate is not trusted by the browser until they manually add the signing certificate into their certificate cache, or will have to click to accept the fact that the certificate may be untrusted.
With a known CA such as Verisign, the signing certificate will typically already be preinstalled on their PC, so the user will receive no prompt
Also a security consideration (from Wikipedia - haven't encountered this myself): "Self-signed certificates cannot (by nature) be revoked, which may allow an attacker who has already gained access to monitor and inject data into a connection to spoof an identity if a private key has been compromised. CAs on the other hand have the ability to revoke a compromised certificate, which prevents its further use."
I would think most security-conscious people would hesitate to import some guy's root certificate. Heck, i have certificates i've generated MYSELF that i don't want to import. And a lot of software will refuse to deal with a server whose cert isn't issued by a CA it (or the OS) trusts.
Seriously, check out http://www.startssl.com. They offer free certificates, which appear to be pretty well supported by most common browsers and OSes. It's a lot easier than even trying to tell people how to install your root cert.
There's no real downside, but it's easier to use a private CA in those circumstances. That private CA has a self-signed certificate, and authorizes everything else in your closed world. Write down a policy (you know, on a piece of paper) for who gets their certificate signed and how you go about doing the signing, and you'll be operating like the “real” CAs do.
But if there are external business partners involved, it's probably easier to just use a normal CA. You can get your service certificates signed for very little so cheap-skating on them is just not really worth it. It only becomes a hassle when you start to want to do things like delegated authority and things like that; at that point, you want to start reading about OAuth and FOAF+SSL. And maybe other things too; it's a deep rabbit-hole.