Password Encryption 101: What It Is and Why It Matters for Credential Security

Password encryption is one of those fundamental security processes that happen behind the scenes, without awareness or notice by most people. Without this critical protection layer, your passwords would just be stored in plain text—as easy to read as this blog, should anyone be able to access your company’s server. Then, whoever accessed your credentials could use them to make malicious changes tied to your logins, or even sell them to the highest bidder. Clearly, password encryption is an essential piece of any organization’s cybersecurity toolbox.

In this blog, we’ll explore how encryption protects your passwords, break down other cryptographic concepts, like hashing and salting, and explain how enterprise tools like BeyondTrust Password Safe can help your organization stay secure, especially when it comes to managing privileged passwords.

Password encryption works by scrambling your password to make it unreadable and unusable by anyone but the user. Its main purpose is to protect the password while it’s in transmission, only decrypting it when you request to log in.

Password encryption uses an algorithm and an encryption key, which is a randomized string of bits, to turn plaintext (e.g., a readable password) into an unreadable format. When a login or file access later occurs, the encryption key is used to decrypt the data and reverse it into a readable format. This process is crucial to protect passwords, as it enables the secure storage and transmission of data.

There are a few different ways to implement password encryption across your environment, including various methods and algorithms.

Encryption Algorithms

There are also a few different algorithms that can be used for encryption in general, including:

• Triple Data Encryption Standard (DES), which was an industry standard for many years, and uses three individual keys, each with 56 bits. Today, Advanced Encryption Standard (AES) is more highly recommended.
• Advanced Encryption Standard (AES), which is today’s standard and is highly trusted by numerous organizations. It typically uses a 128-bit key but can also use 192 or 256 bits if extra security is required.
• Rivest-Shamir-Adleman (RSA) is an asymmetric algorithm that uses a pair of keys—a public one to encrypt the data and a private one to decrypt it.
• Blowfish, which is a free, public domain algorithm, splits data into several blocks that range from 32-448 bits and encrypts each one separately.
• Twofish, which is another public domain algorithm, is a 128-bit block cipher.

By ensuring passwords are unreadable as they are transmitted from one party to another, encryption provides important protection against a broad range of password cracking methods used by threat actors. Encryption of passwords provides the following benefits:

• Lowered risk of data breaches. If an attacker were to gain access to a database containing passwords, they would not be able to read or use the stored passwords without the corresponding decryption keys.
• Compliance with common regulations. Many compliance frameworks, such as HIPAA, PCI DSS, and GDPR, require that organizations use encryption to secure sensitive data such as passwords.
• Smaller blast radius of insider threats. Encryption ensures that even authorized internal users such as admins cannot access others’ passwords in plain text, protecting the business from intentional or unintentional insider threats.

Encryption is adjacent to, but not the same as, other cryptographic methods for protecting passwords and data such as hashing and salting. But when used together, these techniques can provide significantly more robust password protection.

Encryption vs. Hashing vs. Salting

Encryption, hashing, and salting are all important to securing credentials, but are very different processes:

• Encryption is a two-way process. In other words, it's possible to encrypt data and then return it to its original form when the corresponding decryption key is used. Its main purpose is to protect data confidentiality when in transit and at rest.
• Hashing converts passwords into strings of characters, called hash values. However, it cannot be directly reversed, as with encryption. Upon login, the system will compare the user’s input with the stored hash, and grant access if they match. Hashing is primarily an authentication method, as it verifies data integrity. Because hashing checks to ensure that passwords haven’t been tampered with or modified, it's particularly important for ensuring protection of passwords at rest (stored).
• Salting adds a random string of characters (known as a salt) to the password before it is hashed. This added layer of security ensures hashes will be different if multiple users happen to choose the same password. Salting of passwords also prevents other issues, such as hash collisions (different inputs accidentally producing the same hash) and protects against brute-force attacks or attacks that rely on precomputed hashes. Since it's an extension of hashing techniques, it also cannot be reversed, as encryption can be.

By implementing encryption, hashing, salting, or any other password security approach, you can further secure your credentials while at rest and in transit. However, it requires more than just these techniques to fully secure your logins. It’s also up to you, as the user, to create the strongest-possible passwords.

Strive for strong password policies, ensuring that yours are:

• Memorable – make it easy to remember your password without writing it down in plaintext yourself—whether you memorize it or store it in a secure password management solution.
• Strong – Add special characters, numbers, and capitalization to each password to make it longer and more complex. Password length and complexity add time to how long it can take to break in.
• Unique – Don't use the same password for every system. If you do, attackers would only need to figure out one password to get access to everything.

Layering Password Safe with Encryption to Protect Privileged Passwords

When it comes to securing privileged passwords specifically, encryption, strong password creation, and other cryptographic methods, like hashing and salting, should be supplemented with other protective measures. Organizations should consider how they are layering on other password protection methods for their most valuable account credentials, and doing so in a scalable way.

BeyondTrust Password Safe combines encryption best practices with other robust password security controls. Secure your privileged passwords with:

• Automatic discovery, onboarding, vaulting and rotation for credentials, keys, and secrets
• Session management and analytics tracking for privileged credential activity and sessions, making compliance simple
• Just-in-time access control for users, machines, and AI agents accessing your environment with privileged credentials
• Application password management for eliminating hard-coded credentials
• Workforce Passwords extension for applying enterprise-scale visibility to employee password management

By layering foundational best practices such as encryption, hashing, and strong password creation with Password Safe, your entire environment, especially your most sensitive accounts, will be stronger than ever.

Learn more about how BeyondTrust Password Safe shrinks your identity attack surface by securing your most sensitive credentials. See it in action with a 1:1 demo.