Your attack vector is correct, but Kryptonite is still a step up from existing solutions since you know exactly when your key is used and what host is being logged in to (the app does known host pining as well).
YubiKeys don't have a UI to show you what you're approving plus suffer the same problem you described. Most developers store keys as files on their machine which can be easily stolen (even if they're encrypted on disk) and used to authenticate to as many servers as the adversary likes without you even knowing.
YubiKeys don't have a UI to show you what you're approving plus suffer the same problem you described. Most developers store keys as files on their machine which can be easily stolen (even if they're encrypted on disk) and used to authenticate to as many servers as the adversary likes without you even knowing.