It means that:
The computer scrambles your password in a very special, and hard to de-scramble way(there’s all kinds of ways of doing it, MD5, etc.).
In fact, the computer isn’t even going to try to de-scramble it, once it does that. It’s just going to remember what it came up with, after scrambling it.
Then what will happen is…it will scramble the password you give it to log in next. And then it will look to see, if it scrambled them the same way.
If the password you gave it, turns into the same scrambled mess, well then, hooray! You have just provided a password, that when scrambled, looks…however you visualize it to be. Box of scrambled LEGOs, anagrams, whatever. The point though, is that it looks the same as an outcome.
Edit: If you want more in depth than that, say so. That’s a layman’s explanation. If you want an explanation of digest algorithms and why they are used here, and what that means cryptographically….well, ask…but be prepared for a deluge of technical information.
Say you give a password to a website.
If they just kept the password, and someone stole it from them, then they would have your password and this would be really bad.
So instead they use math to scramble up the password in a specific way. Now instead of giving them the password, you take your password, scramble it up in that specific way, and then give it to them.
So they check to see if it matches.
Now say someone steals all those hashed passwords. It’s going to take a ton of computing power to figure out your password from the hash.
This is why so many companies ask you to make complicated passwords, because it makes them guessing the password from your hash that much harder.
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