The behavior of the NODE is such that in local addressing (127.0.0.1 or 192.168.0.1 ), the node transmits YOUR secret password to sign the transaction to the SERVER. When you work at 127.0.0.1, nothing leaves your computer, but if you use a WIFI router or some kind of large switch (which someone can access), you risk leaking the PASSWORD, since WIFI routers are easily hacked.