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I came through a wonderful link that focuses on Security with Silverlight 3 and Silverlight 4 applications.  Kudos to Nick, who has explained this wonderfully...

For all my readers, do read this post... Its wonderful!

@Nick: Thanks man!

Link: http://blogs.msdn.com/nickkramer/archive/2009/11/20/silverlight-4-security-overview-white-paper.aspx