Best practices for storing passwords in a SQL Server.

I am looking for some advice and best practices for storing user passwords in a SQL server database.  I am developing an SSO application and need to store user names and passwords for users.  I have secured the server physically, and followed the recommendations for securing the SQL server, however, I need some advice on the best way in which to store passwords?  Should I encrypt the passwords before I store them in the database?  If so, what is a good standard?

Thank you for any advice.  
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Guy Hengel [angelIII / a3]Billing EngineerCommented:
the best is to store hash values of the passwords. that way, they cannot be "decrypted" or so.
only the application hash function will be applied to the user input for the password, and the hashed values will be compared.

in sql server, you use VARBINARY for the data type of the hashed values.
Here are some good tips on how to secure your information and best practices for storing passwords. They show you how to do it in a nice and clean way.  

Good luck.
Angel is right. You should encrypt them and the tutorial I mentioned shows you how to do that.  

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Anthony PerkinsCommented:
Actually hashed passwords is not quite the same as encrypted the password:  With hashed passwords you never store the password and in general is a better approach.
shanemayAuthor Commented:
I have been reading up on hashing passwords and just comparing the hashed bytes and not comparing the passwords as text.  I understand the principle, however, I do not understand how a hashed password could not be decoded.    Thanks for everyone's advice and help.  
Anthony PerkinsCommented:
>>I understand the principle, however, I do not understand how a hashed password could not be decoded.<<
Simple. Since the password is not stored it cannot be decrypted.

Here is a very simple algorithm (not one I would recommend, but serves to illustrate my point):
Supposing that your algorithm is adding the ASCII values for each letter, so "Password" becomes 80 + 97 + 115 + 115 + 119 + 111 + 114 + 100 = 851
You then store 851 in your database.  As you can see it is virtually impossible to go back from 851 to "Password".  Somewhat akin to converting a hamburger back into a cow.
shanemayAuthor Commented:
Thank you for the explanation, I completely understand.  For my purposes I need to encrypt the password not use a hash.  It looks like my best option might be the .Net System.Security.Cryptography namespace and use the RSA encryption API.

Any thoughts.    
Anurag ThakurTechnical ManagerCommented:
you can have a look at the following implementation of password encryption with MD5
Using MD5 Encryption with C# and MSSQL 2000

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shanemayAuthor Commented:
Thank you for the outstanding advice and help.  
Anthony PerkinsCommented:
>>For my purposes I need to encrypt the password not use a hash. <<
Which is not to say you cannot also encrypt the hashed password.
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Microsoft SQL Server 2005

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