What is Password Hashing and Why Is It Important?

Password hashing is the backbone of secure authentication on the internet. When you create an account or log into a website, your password shouldn’t be stored in plain text. Hashing prevents such an inconvenience.

It’s a cryptographic process that transforms your password into a unique, fixed-length string of characters. Even if hackers gain access to the database, they can’t reverse the hash back to your original password.

This guide breaks down how password hashing works, why it’s essential for protecting user data, and what makes a hashing algorithm secure. 

But before that, let’s take a moment to understand everything that is wrong with plaintext passwords.

Why Plaintext is a No-Go

Storing passwords in plaintext is one of the biggest security mistakes a system can make. It means anyone who gains access to the database can instantly view every user’s password in readable form.

It’s an open invitation to identity theft, account takeovers, and security failures across platforms, especially since many users reuse passwords across websites.

From a legal standpoint, storing plaintext passwords also violates basic data protection standards like GDPR, HIPAA, and PCI-DSS. It reflects negligence on the developer’s part and exposes users to harm they never signed up for.

In short, plaintext storage compromises user trust, damages brand reputation, and makes recovery from a breach worse. Password hashing exists specifically to prevent these risks. It does so by making stored passwords unreadable and nearly impossible to reverse-engineer.

Let’s see how password hashing and the encryption of password work.

What is Password Hashing and How Does It Work?

Password hashing is a one-way cryptographic function that converts a plain-text password into an irreversible string of characters called a hash. Unlike encryption, which can be reversed with a key, a hash cannot be “decrypted” back into its original form. This makes hashing ideal for password storage.

Simply put, even if a hacker gains access to the database, the actual passwords remain hidden.

Here’s how it works step by step:

1. User Input: A user enters their password during sign-up.
2. Hashing Algorithm: The system runs this password through a hashing algorithm like SHA-256, bcrypt, or Argon2.
3. Hashed Output: The algorithm returns a fixed-length string, regardless of the input size.
4. Storage: Only the hash is stored in the database and not the password itself.
5. Login Verification: When the user logs in again, the inputted password is hashed and compared to the stored hash. If they match, access is granted.

The same input will always produce the same output, but you can’t reverse the process to retrieve the original password. 

Additionally, to make it even more secure, there are several best practices, including salting which adds random data to passwords before hashing to protect against rainbow table attacks and duplicate hashes (more on these later).

In short, password hashing protects users even in the event of a data breach by ensuring that their actual passwords are gibberish or unreadable.

Also Read: Passkeys vs Passwords — What Are They, And Which Is Better?

Common Types of Password Hashing Algorithms

Some kinds of hashing algorithms are faster and more efficient, but not secure enough for authentication systems. Others are intentionally slow to defend against brute-force attacks. Below are the most widely used and trusted password hashing algorithms today:

1. SHA-256 (Secure Hash Algorithm 256-bit)

Part of the SHA-2 family, SHA-256 is a cryptographic hash function that generates a 256-bit (64-character) hash. It’s widely used for data integrity and digital signatures, but it’s not ideal for password storage on its own because it’s too fast, which makes it vulnerable to brute-force or GPU-based attacks unless combined with salting (more on this later) and key-stretching techniques.

2. bcrypt

bcrypt is specifically designed for password hashing. It automatically incorporates a salt to protect against rainbow table attacks (more on this one later as well) and allows you to configure the cost factor, which determines how computationally expensive the hashing process is. As computing power increases, bcrypt can be adjusted to stay secure.

3. Argon2

The winner of the Password Hashing Competition (PHC), Argon2, is currently considered the most secure and modern password hashing algorithm. It supports three variants: Argon2d (resistant to GPU cracking), Argon2i (resistant to side-channel attacks), and Argon2id (a hybrid of both). It offers advanced controls for memory usage, time cost, and parallelism, making it very difficult to crack.

4. PBKDF2 (Password-Based Key Derivation Function 2)

PBKDF2 applies a pseudorandom function (usually HMAC) to the input password along with a salt and repeats the process thousands of times. While it’s older than bcrypt and Argon2, it’s still used in many systems (e.g., WPA2 Wi-Fi encryption and some web apps) due to its configurability and strong security under the right settings.

Sometimes, people use this password hashing interchangeably with encryption. Which is not the case, because there is a significant difference between the two.

Hashing vs. Encryption: Key Difference

While both hashing and encryption fall under the umbrella of cryptography, they serve very different purposes. Mistaking one for the other can lead to major security oversights.

As discussed, hashing is a one-way function. Once a password is hashed, it cannot be reversed or “unhashed.” It’s primarily used for verification, such as comparing user input to a stored hash during login. The goal is not to retrieve the original data but to check if it matches what was originally provided.

Encryption, on the other hand, is a two-way process. It transforms readable data into unreadable ciphertext using a specific key. The key here is that, unlike hashes, the same data can later be decrypted back into its original form using the right key. This is useful for things like emails, files, or messages that need to be securely transmitted and later restored.

Since hashes can’t be reversed, they’re perfect for storing passwords. Encryption, while powerful, is not suitable for password storage because if an attacker obtains the decryption key, they can expose every user’s password in plain text. That’s why modern authentication systems rely on hashing, not encryption, for keeping passwords safe.

Salting and Peppering: How These Strengthen Your Hashes

These are techniques designed to add randomness to the password hashing process, making it significantly harder for attackers to crack hashes using precomputed values like rainbow tables.

What is Salting?

A salt is a random string of characters added to the password before it’s hashed. The purpose of a salt is to ensure that even if two users have the same password, their hashes will be completely different.

For example:

• Password: mypassword
• Salt: @39fKLz!
• Final hash input: mypassword@39fKLz!

Salts are typically unique per user and stored alongside the hash in the database. This randomness defeats rainbow tables and prevents attackers from spotting duplicate hashes in a stolen database.

What is Peppering?

A pepper is similar to a salt, but it’s added to the password either before or after the hashing process and kept safe in a secure location (like an environment variable or server config file).

Why it matters:

• If an attacker compromises your database, they’ll still need access to the pepper to make sense of the hashes.
• Unlike salts (which are unique per user), a pepper is typically the same for all passwords in an application, but its secrecy adds another layer of protection.

Using Both Together

Salting and peppering can be used together:

• Salt defends against large-scale precomputed attacks.
• Pepper protects against offline brute-force attacks if the database is leaked.

By combining both techniques with a slow, secure hashing algorithm like bcrypt or Argon2, you can drastically reduce the chances of password hashes being cracked, even in the event of a breach.

Enough with the ifs, buts, and the dynamics of the password hashing, let’s jump into the action or what you can do to enhance your online security. 

Best Practices for Your Online Security

Let’s jump into the action. Here is what to do to ensure online safety from common cyberattacks.

Use Strong And Unique Passwords

Avoid reusing the same password across multiple accounts. A data breach on one platform can easily compromise others. Use a mix of uppercase letters, lowercase letters, numbers, and special characters. Better yet, opt for passphrases that are both long and memorable. Don’t make these password mistakes.

Enable Two-Factor Authentication (2FA)

2FA adds a second layer of security by requiring a code from your phone or an authentication app. Even if your password is compromised, the attacker won’t be able to log in without that second factor.

Use a Password Manager

Password managers generate and store strong, unique passwords for each site. They not only make life easier but also reduce the risk of weak or reused credentials.

Beware of Phishing

Never click suspicious links or enter your credentials on websites that don’t look right. Always check the URL and use browser tools to verify site identity.

Update Your Software Regularly

From browsers to plugins to operating systems, always keep your software up to date. Many breaches happen because of unpatched vulnerabilities.

Use Password Protected Plugin (for WordPress users) 

Sometimes, letting your guard down even for a minute can invite hackers. Therefore, if you use WordPress, install the Password Protected plugin to make your website private before working on other strategies to make it more secure. Hide sensitive pages, restrict content, or IPs.

Final Words

Password hashing is a cornerstone of modern online security. Understanding how passwords are stored and protected gives you a major advantage in the fight against data breaches.

As attacks become more sophisticated, so must our defenses. Knowing the difference between hashing and encryption, choosing the correct algorithm, and applying techniques like salting and peppering are essential.

A mix of strong password habits, basic awareness, and trust in platforms that follow best practices can go a long way.

Shield your website with an additional password screen using Password Protected. Not to mention, you get additional amazing features, including limit login attempts, categories/taxonomies protection, password-activity tracking, password screen customization, and much more. Check out the full feature list!

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