The password has to be hashed on the server side. If you hash the password on the client on the server side and send the hashed password to the server, then the hashed password is the thing the server checks to authenticate you, and "thing the server checks to authenticate you" is, by definition, the password.
Hashing and encryption both provide ways to keep sensitive data safe. However, in almost all circumstances, passwords should be hashed, NOT encrypted. Hashing is a one-way function (i.e., it is impossible to "decrypt" a hash and obtain the original plaintext value). Hashing is appropriate for password validation.
You shouldn't crypt passwords. You should hash them, so you could not decrypt them later (nor an attacker). And the hash step is always done on the backend, since doing it on client-side would allow an attacker which got access to your hashes a method to login on every account.
When the user enters a password, this is sent over the network and hashed on the server using a copy of the same hashing function. The resulting hash is compared to the hash stored on the password server. Only if they match will the user be granted access.
This is an old question, but I felt the need to provide my opinion on this important matter. There is so much misinformation here
The OP never mentioned sending the password in clear over HTTP - only HTTPS, yet many seem to be responding to the question of sending a password over HTTP for some reason. That said:
I believe passwords should never be retained (let alone transmitted) in plain text. That means not kept on disk, or even in memory.
People responding here seem to think HTTPS is a silver bullet, which it is not. It certainly helps greatly however, and should be used in any authenticated session.
There is really no need to know what an original password is. All that is required is a reliable way to generate (and reliably re-generate) an authentication "key" based on the original text chosen by the user. In an ideal world this text should immediately generate a "key" by hashing it using irreversible salt. This salt should be unique to the user credential being generated. This "key" will be what your systems use as a password. This way if your systems ever get compromised in the future, these credentials will only ever be useful against your own organisation, and nowhere else where the user has been lazy and used the same password.
So we have a key. Now we need to clean up any trace of the password on the clients device.
Next we need to get that key to your systems. You should never transmit a key or password "in the clear". Not even over HTTPS. HTTPS is not impenetrable. In fact, many organisations can become a trusted MITM - not from an attack perspective, but to perform inspections on the traffic to implement their own security policies. This weakens HTTPS, and it is not the only way it happens (such as redirects to HTTP MITM attacks for example). Never assume it is secure.
To get around this, we hash the key with a once off nonce. This nonce is unique for every submission of a key to your systems - even for the same credential during the same session if you need to send it multiple times. You can reverse this nonce once it arrives in your own systems to recover the authentication key, and authenticate the request.
At this point I would irreversibly hash it one last time before it is permanently stored in your own systems. That way you can share the credential's salt with partner organisations for the purposes of SSO and the like, whilst being able to prove your own organisation cannot impersonate the user. The best part of this approach is you are never sharing anything generated by the user without their authorisation.
Do more research, as there is more to it than even I have divulged, but if you want to provide true security to your users, I think this method is currently the most complete response here.
TL;DR:
Use HTTPS. Securely hash passwords, irreversibly, with a unique salt per password. Do this on the client - do not transmit their actual password. Transmitting the users original password to your servers is never "OK" or "Fine". Clean up any trace of the original password. Use a nonce regardless of HTTP/HTTPS. It is much more secure on many levels. (Answer to OP).
Since it's over HTTPS, it's definitely just fine to send the password without hashing (over HTTPS it's not plaintext). Furthermore, if your application is depending on HTTPS to keep it's content secure, then it's useless to hash the password before sending it over HTTPS (i.e. if an attacker can unencrypt the data on the wire, you're screwed anyways)
No, in fact this would be a vulnerability. If the attacker is able to obtain the hash from the database, then he could use it to authenticate without needing to crack it. Under no circumstance should a user or an attacker be able to obtain a hashes password.
The whole point of hashing passwords is to add an extra layer of security. If an attacker is able to obtain the hash and salt from the database using SQL Injection or an insecure backup then he has to find the plain text by brute forcing it. John The Ripper is commonly used to break salted password hashes.
Not using https is a violation of the OWASP Top 10: A9-Insufficient Transport Layer Protection
EDIT:
If in your implementation you calculate a sha256(client_salt+plain_text_password)
and then calculate another hash on the server side sha256(server_salt+client_hash)
then this is not a serious vulnerability. However, it is still susceptible to eavesdropping and replaying the request. Thus this is still a clear violation of WASP A9. However, this is still utilizing a message digest as a security layer.
The closest thing i have seen to a client-side replacement for https is a diffie-hellman in key exchange in javascript. However, this does prevent active MITM attacks and thus is till technicality a violation of OWASP A9. The Authors of the code agree that this is not a complete replacement for HTTPS, however it is better than nothing and better than a client-side hashing system.
Sending a hash over the wire completely defeats the purpose of the hash, because an attacker can simply send the hash and forget about the password. In a nutshell, a system that athenticates using a hash in clear text is wide open and can be compromise with nothing more than network sniffing.
The password in plaintext show never (not even when using HTTPS) leave the client. It should be irreversibly hashed before leaving the client as there is no need for the server to know the actual password.
Hashing then transmitting solves security issues for lazy users that use the same password in multiple locations (I know I do). However this does not protect your application as a hacker that gained access to the database (or in any other way was able to get his hands on the hash) as the hacker could just transmit the hash and have the server accept it.
To solve this issue you could of course just hash the hash the server receives and call it a day.
My approach to the issue in a socket-based web application I'm creating is that on connection to the client the server generates a salt (random string to be added before hashing) and stores it on the sockets variable, then it transmits this hash to the client. The client takes the users password, hashes it, adds the salt from the server and hashes the whole thing, before transmitting it to the server. Then it's sent to the server which compares this hash to the hash(hash in the DB + salt). As far as I know this is a good approach, but to be fair I haven't read a lot on the topic and if I'm wrong about anything I'd love to be corrected :)
Use HTTP Digest - it secures the password even over http (but best useage would be http digest over https)
Wikipedia:
HTTP digest access authentication is one of the agreed methods a web server can use to negotiate credentials with a web user (using the HTTP protocol). Digest authentication is intended to supersede unencrypted use of the Basic access authentication, allowing user identity to be established securely without having to send a password in plaintext over the network. Digest authentication is basically an application of MD5 cryptographic hashing with usage of nonce values to prevent cryptanalysis.
Link: http://en.wikipedia.org/wiki/Digest_access_authentication
If you want to see a "real life" use, you could look at phpMyID - a php openid provider that uses http digest authentication http://siege.org/phpmyid.php
.. or you could start from the php auth samples at http://php.net/manual/en/features.http-auth.php
Http digest rfc: http://www.faqs.org/rfcs/rfc2617
From my tests all modern browsers support it...
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