Passwords should never be stored as plain text. Whether we are talking about a web application or an operating system, they should always be in the hash form (on Linux, for example, hashed passwords are stored in the /etc/shadow file). Hashing is the process through which, by the use of complex algorithms, a password is turned into a different string. Learn how to hash passwords in Linux here.

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Source: Linux Today – How to Hash Passwords in Linux