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I have read in many articles that we should combine an unique salt to each passwords before hashing and store the salt in database for verification but How about using the password itself as an salt ?
Doing this will benefit as the salt will be unique for each as well as it will be hidden as it will be stored no where.
An simple example I can give for above is:
$hashToStore=sha1(strrev($password).$password);
Above I am just reversing the password and using it as an salt (I will be doing something more complex then just reversing it in development.)
Is This an better way for storing passwords or will be a bad practice.
PS:I am completely aware of php latest inbuilt functions such as crypt() and use it in real world, but yet wanted an review for above.
A common mistake is to use the same salt in each hash. Either the salt is hard-coded into the program, or is generated randomly once. This is ineffective because if two users have the same password, they'll still have the same hash. An attacker can still use a reverse lookup table attack to run a dictionary attack on every hash at the same time. They just have to apply the salt to each password guess before they hash it. If the salt is hard-coded into a popular product, lookup tables and rainbow tables can be built for that salt, to make it easier to crack hashes generated by the product.
A new random salt must be generated each time a user creates an account or changes their password.
[…] It's easy to get carried away and try to combine different hash functions, hoping that the result will be more secure. In practice, though, there is very little benefit to doing it. All it does is create interoperability problems, and can sometimes even make the hashes less secure. Never try to invent your own crypto, always use a standard that has been designed by experts. Some will argue that using multiple hash functions makes the process of computing the hash slower, so cracking is slower, but there's a better way to make the cracking process slower as we'll see later.
Here are some examples of poor wacky hash functions I've seen suggested in forums on the internet.
md5(sha1(password))
md5(md5(salt) + md5(password))
sha1(sha1(password))
sha1(str_rot13(password + salt))
md5(sha1(md5(md5(password) + sha1(password)) + md5(password)))
Do not use any of these.
Salt should be generated using a Cryptographically Secure Pseudo-Random Number Generator (CSPRNG). CSPRNGs are very different than ordinary pseudo-random number generators, like the "C" language's rand() function. As the name suggests, CSPRNGs are designed to be cryptographically secure, meaning they provide a high level of randomness and are completely unpredictable. We don't want our salts to be predictable, so we must use a CSPRNG. The following table lists some CSPRNGs that exist for some popular programming platforms. (PHP: mcrypt_create_iv, openssl_random_pseudo_bytes)
The salt needs to be unique per-user per-password. Every time a user creates an account or changes their password, the password should be hashed using a new random salt. Never reuse a salt. The salt also needs to be long, so that there are many possible salts. As a rule of thumb, make your salt is at least as long as the hash function's output. The salt should be stored in the user account table alongside the hash.
To Store a Password
Generate a long random salt using a CSPRNG.
Prepend the salt to the password and hash it with a standard cryptographic hash function such as SHA256.
Save both the salt and the hash in the user's database record.
To Validate a Password
Retrieve the user's salt and hash from the database.
Prepend the salt to the given password and hash it using the same hash function.
Compare the hash of the given password with the hash from the database. If they match, the password is correct. Otherwise, the password is incorrect.
At the bottom of this page, there are implementations of salted password hashing in PHP, C#, Java, and Ruby.
In a Web Application, always hash on the server
If you are writing a web application, you might wonder where to hash. Should the password be hashed in the user's browser with JavaScript, or should it be sent to the server "in the clear" and hashed there?
Even if you are hashing the user's passwords in JavaScript, you still have to hash the hashes on the server. Consider a website that hashes users' passwords in the user's browser without hashing the hashes on the server. To authenticate a user, this website will accept a hash from the browser and check if that hash exactly matches the one in the database. This seems more secure than just hashing on the server, since the users' passwords are never sent to the server, but it's not.
The problem is that the client-side hash logically becomes the user's password. All the user needs to do to authenticate is tell the server the hash of their password. If a bad guy got a user's hash they could use it to authenticate to the server, without knowing the user's password! So, if the bad guy somehow steals the database of hashes from this hypothetical website, they'll have immediate access to everyone's accounts without having to guess any passwords.
This isn't to say that you shouldn't hash in the browser, but if you do, you absolutely have to hash on the server too. Hashing in the browser is certainly a good idea, but consider the following points for your implementation:
Client-side password hashing is not a substitute for HTTPS (SSL/TLS). If the connection between the browser and the server is insecure, a man-in-the-middle can modify the JavaScript code as it is downloaded to remove the hashing functionality and get the user's password.
Some web browsers don't support JavaScript, and some users disable JavaScript in their browser. So for maximum compatibility, your app should detect whether or not the browser supports JavaScript and emulate the client-side hash on the server if it doesn't.
You need to salt the client-side hashes too. The obvious solution is to make the client-side script ask the server for the user's salt. Don't do that, because it lets the bad guys check if a username is valid without knowing the password. Since you're hashing and salting (with a good salt) on the server too, it's OK to use the username (or email) concatenated with a site-specific string (e.g. domain name) as the client-side salt.
source: https://crackstation.net/hashing-security.htm
So, to answer your question, bad idea, very bad idea.
Please, don't ever do this. The whole point of salting is that every persons password hash will be unique which removed the issues of rainbow tables and giving away who has the same password.
Why does that matter? Look at the LinkedIn hack where they had "password hints". People has hints like "rhymes with assword" which gave away what their password, and also their hash was. It also gave away EVERYONE ELSE who was using the same password.
So recently I have been doing tons of research on how to secure passwords. I believe I understand the basics of it. As such I am attempting to write my own function to secure a password in php.
But I am somewhat confused when it comes to salting a password. We create a random unique salt and append it to a password and then hash it, and finally store the unhashed salt and hashed password/salt combination together in the database. This increases the search space of the hacker if he obtains access to the database and our hashed passwords.
So this seems like complete overkill of security, but everywhere I see the salt is always appended to the front or back of the password anyways. So looking at a SINGLE user's password this unique salt doesn't affect the search space does it? Although since each user has a unique salt the overall search space of EVERY user is dramatically increased.
Wouldn't it be more secure to create an algorithm that inserts the salt to a predictable, semi-random place in the password such as the length of the username/2? For example here is the steps of my proposed securing function:
Create a random salt
take username length %(mod) password length
insert the salt at the spot determined
hash
Example run:
random salt = 12345
len("imauserwithalongname") % len("mypass") = 2
valueToHash = my12345pass
Now our cracker has no idea where to put the salt without seeing our php/source, which (correct me if I am wrong) is much harder to gain access to than the database.
Also I know security should depend on the security of the key not secrecy of the algorithm, however I see nothing wrong with adding layers based on it, as long as the entire system does not depend on secrecy of the algorithm.
EDIT: Would doing this dramatically increase the search space of a cracker?
And what if we placed the salt in a place that depended on the length of the password, would that not destroy the purpose of using dictionary attacks, even on a per user basis?
Inserting the salt in a different spot doesn't increase the search space. If you are using a random salt for each user, a hacker does not know what each salt is per user anyway. The knowledge of its position in the unhashed string doesn't matter.
Use bcrypt or PBKDF2. Both algorithms enforce a salt and number of cycles. If you're patient enough, PHP 5.5 will just let you do password_hash($password).
As such I am attempting to write my own function to secure a password
in php.
Woah woah, hold it right there.
There's a saying passed down from cryptographers to us mere mortals which has held true for many many years. The saying goes like this:
Do not invent your own crypto.
Say it out loud, then say it again.
I know you're only trying to secure your passwords, but I had to get that out of the way. There are lots and lots of tried and tested methods to do what you want to achieve.
I appreciate you've done some research, but the internet is full of terrible terrible information, so I'm going to point you towards some useful articles.
Check out ircmaxell's security related
blogs.
A nice short list.
Here's some keywords to help you.
Bcrypt
Scrypt (someone please unstrike this when PHP supports it)
Again a very short list.
To address your specific concern. Salts are not needed to be kept private, as you say they are designed to stop attackers precomputing tables of valid password/hash combinations. However if you use a weak hashing algorithm they lose their value very quickly.
Security through obscurity is not as great as it seems. If a hacker gains access to your DB, the odds are quite high that they will also gain access to your filesystem. If they gain access to your source your custom method of storing passwords is a moot point.
In summary, custom algorithm + weak hash = insecure.
Instead you want to use tried and tested key derivation functions / key strengthening algorithms.
These are designed to make the computer work really hard to generate the hash, and makes it very difficult for an attacker to brute force a password.
Bcrypt stores the salt next to the password, and is proven to be very secure. Secure enough in fact that it is currently the recommended way to hash passwords by security experts.
In PHP 5.5 a simple password hashing API has been introduced based on Bcrypt, and for versions under 5.5 there is a password hashing compatibility library that does exactly the same thing.
That should be enough for you.
I personally think you're overdoing it. The most efficient way to salt a hash would be to have a dynamic, record-specif one AND a static one stored in a read-only file on the system. This is a very efficient yet secure way of salting hashes.
I think you misunderstood the purpose of the salt. The salt does not increase the search space for an attacker, after all it is stored plaintext with the hash-value. The purpose of a salt is, that an attacker cannot build one single rainbowtable, and then retrieve all stored passwords.
If you would append the same salt to every password, then the attacker cannot simply use an existing precalculated rainbow-table from the internet, he has to build a new rainbow-table for exactly this salt (existing rainbow-tables will contain passwords like "horse", but not passwords like horse8ze*w398dhek3+qmxno0). Unfortunately this single rainbow-table can then be used to get all passwords.
So we use a unique salt for every password. An attacker would have to build a separate rainbow-table for each password now, but why should he continue with building the table, when he already found a match (?), he cannot reuse the table later for other passwords. In other words, brute-force is faster than building a rainbow-table, so we made rainbow-tables useless.
So the salt should be unique for each password and if possible it should be unpredictable. Those criterias are difficult to fulfill with a deterministic computer, the best you can do is, to use the random source of the operating system to build the salts. Good hash algorithms for passwords like BCrypt and PBKDF2 repeat the hashing to become slow, and combine password and original salt in each iteration. It is not just a concatenation of password + salt.
Your idea about putting the salt somewhere secret does add a secret (where is the salt?), that will work as long as the attacker doesnt know your code. Getting the database (SQL-injection) is indeed easier than gaining access to the code, but the same goal can be achieved much easier with a pepper.
I tried to sum up this in a tutorial, maybe you want to have a look at it.
I have some doubts about the best way to do a database with passwords. I need encryption in the passwords, but if i use MD5 i can't recover the pass, isn't it?
And the base64 encoder ? it is secure? with this encryption the recover isn't more a problem.
Suggestions? what is the best way? e prefer a solution that permit to remember the old pass, and not define a new one password.
Thanks!!!
If anybody know a good tutorial about secure passwords in a database i really appreciate that
if i use MD5 i can't recover the pass,
isn't it?
Indeed, if you hash your password using md5 or sha1 (adding a salt is a good idea, btw), you will not be able to recover the password ; and that's the goal of doing so !
The idea is if anyone is able to take a look at your database (be it some evil doer, or one of your employees -- who can be an evil-doer), he will not be able to find any usefull password.
what is the best way? e prefer a solution that permit to
remember the old pass, and not define
a new one password.
The best way is to do the opposite of what you want : not allow one to get his old password -- and develop some way of generating a new password.
This way, you will ensure that no-one is able to get a dump of your logins and corresponding password ; which will make your service safer for your users (especially considering that many people use the same login/password couple of several websites).
MD5 is not used for encryption (which implies that it can be decrypted) but rather for message digestion/hashing. Base64 is also not encryption but rather encoding, which can be decoded with no effort.
There is usually little point in storing encrypted passwords in a database if they can be easily decrypted.
The secure approach is to store only hashes and compare submitted passwords to stored hashes after hashing them on the fly.
You should be doing something along the lines of:
$salt = 'some2%string!!here1';
$hash = sha1( $salt . $_POST['password'] );
to create a hash of the password. You store that hash in the database. When a user wants to log in, you take his submitted function, hash it using the same process, and compare to the hash in the database. If they match, the password is correct.
First off, there's a Significant Difference Between Hashing and Encryption. I suggest that you give that a read before going on...
Now, as to your exact question, there are a few ways to go about it.
Encrypt your passwords with a strong cipher so that you can decrypt them when necessary. A solution such as the one in this post may work for that. However, please note that this isn't a great idea, since if your system is ever compromised, all the passwords will be leaked (never a good idea). There are very few use-cases where it makes sense to store them encrypted, but if you absolutely must, please use a strong cryptographic encryption routine to do it...
Store your passwords using a strong one-way hashing method. No, md5($password) is not good enough. But neither is sha1($salt . $password). The first is trivial to lookup most passwords, and the second can be brute-forced in a reasonable amount of time by simple trial and error. Instead, stretch your passwords iteratively. The best way is to use the standard PBKDF2 function to generate a strong one-way key from the password.
As far as how to recover if the user forgets a password, don't worry about it. If the user forgets his password, create a new one and give that one to the user. It's the industry standard way of dealing with forgotten passwords (Heck, both Windows and Mac do it that way). You may think that you're doing your users a favor by sending it to them, but all you're doing is turning off anyone who has a clue about security from every using your application (and making a lot of people mad if you get compromised).
base64 isn't "encryption". It's intended to convert binary data into a format that's safe for transmission through potentially "broken" email systems that can't process 8-bit binary data properly. It's a best the equivalent of a cereal box decoder ring.
If you want encryption, there's AES, DES, and various other functions available. Problem is, if your code can decrypt the password, the it's trivial for an attacker to figure out how you do it, and/or subvert your code to do it for them.
Passwords should never be stored in a format where the plaintext can be retrieved. If a user forgets their password, you wipe out the old one, generate a new temporary one, and force them to change this temporary password to something else on first login.
You should not ever need to remember the user's password - to do so is a violation of their trust and presents a security hole.
Normally you will hash the password with MD5 (these days it's better to use SHA-2), and when the user submits their password to try and log in, hash that password as well, and see if the hashes are a match.
For added security, you can create a "salt" column to the database and generate a random salt when the password is first submitted. Add the salt to the beginning of the password, and then hash it. Store the hash of the salt+password, and the salt together. Now when the user submits his password to log in, you would combine it with the salt, hash it, and check if the hash is a match.
The salt ensures that if multiple users have the same password (chances are they do), their password hashes will not be identical.
If the user forgets their password they will have to provide a new one, simply storing their password and sending it back to them when they forget is bad practice and a sign to the user that you aren't handling their privacy very well.
As mentioned, use a hash instead of encryption when saving passwords. I generally don't use a random salt since this means an extra field in the DB so that you can authenticate the user. The simplest solution is to use the password as the salt as shown below. Easy to use and easy to authenticate.
$salt = $_POST['password'];
$hash = sha1( $salt . $_POST['password'] );
Stop now and read this. Then go find an open source library to do user authentication. I'm not a PHP dev, so I can't refer you to one, but I'm sure they exist. They'll have had the security holes found already.
Also, for passwords, you should be looking at bcrypt or similarly slow hash functions for passwords anyways, instead of using a fast hash algorithm like MD5 or SHA.
I am seeking advice on how to securely store passwords in MySQL using PHP.
Overlooking the limitations of PHP itself, I want to know more about salting, hashing, and encrypting these bad boys.
Obviously people will continue to use weak passwords unless forced to do otherwise, but it's how I am storing them that is important to me. My user's passwords are far more important to me than the database itself, and as such I want to keep them in such a way that it will be painstaking and monotonous for any script kiddie trying reverse. Obviously with due diligence just about anything can be defeated, but I wouldn't mind making this particularly bothersome.
There are two scenarios we are looking at.
The kiddie has a complete copy of the database.
The kiddie has a complete copy of the PHP used to craft the password, and the database.
Any and all advice on this topic is graciously appreciated.
Use bcrypt. If someone has the user table of your database, then they can use brute force/rainbow tables/etc to their heart's content. Even with salt, if you're using MD5 or some other fast-hashing algorithm (which aren't designed to solve this problem, by the way); it's just a matter of time before it can be cracked.
Any well-known and widely-supported hashing algorithm is going to have this same basic "flaw" (if you can call it that; it's really by definition). The difference is that bcrypt is slow as molasses when performing the hashing operation, rendering a brute force attack much less effective.
For an absolutely great discussion on the merits of bcrypt, the dangers of other approaches, and the difficulty of password security in general, read this thread. It has lots of comments by many people that are much more knowledgeable about this sort of thing than I am, and it should hopefully help you understand more of the issues at stake.
Assuming you're using username and password as authentication tokens you can safely store the following to ensure the data can't be compromised.
Username (in plaintext)
Salt (random string)
Salted Hash (sha1(username + salt + password))
Using the scheme, an attacker cannot use rainbow tables against you and the passwords are not recoverable by any (reasonable) means. (That is, as long as your attacker isn't the government)
Even though the attacker has the salt and hash pairs it's not possible to use rainbow tables because all the possible hashes will need to be computed anyway, using the salt that they've been given, so it's a brand new brute force attack for each user.
Even with the source code and attacker won't be able to get hold of the passwords because the strength/security is in the hashing algorithm, not your code.
Combine this with using bcrypt as per Donut's answer and you're really quite safe. That is:
Username (in plaintext)
Salt (random string)
Salted Hash (bcrypt(username + salt + password))
Taking advice from here, for added fun you can dynamically change your salt as well. For example, use different salts for usernames of different length, use the user's registration date as the salt. This makes it that even if someone DOES get to your database, they can't just re-generate the hash, they have to calculate a hash table for each salt that you used.
If your users are over the internet, OpenId would be one of your best options. http://openid.net/
If your users are on your network, can you do Integrated Security?
In other words.. do not store their passwords.
Usually "salted" passwords (like with bcrypt) mean that not the password itself is stored, but only something like
salt
hash(salt with password appended)
Now if the kiddie has your database (and of course, the code - there is no point in keeping the code secret), he/she can only guess passwords, calculate the salted hash, and compare. If the hash function is expensive (like bcrypt is), than guessing is expensive too.
It's simple
store(sha256("somesalt" + password));
And nobody will be able to reverse it :)
See also: https://stackoverflow.com/questions/3897434/password-security-sha1-sha256-or-sha512
I was reading this tutorial for a simple PHP login system.
In the end it recommends that you should encrypt your password using md5().
Though I know this is a beginners' tutorial, and you shouldn't put bank statements behind this login system, this got me thinking about encryption.
So I went ahead and went to (one of the most useful questions this site has for newbies): What should a developer know before building a public web site?
There it says (under security) you should:
Encrypt Hash and salt passwords rather
than storing them plain-text.
It doesn't say much more about it, no references.
So I went ahead and tried it myself:
$pass = "Trufa";
$enc = md5($pass);
echo $enc; #will echo 06cb51ce0a9893ec1d2dce07ba5ba710
And this is what got me thinking, that although I know md5() might not the strongest way to encrypt, anything that always produces the same result can be reverse engineered.
So what is the sense of encrypting something with md5() or any other method?
If a hacker gets to a password encrypted with md5(), he would just use this page!.
So now the actual questions:
How does password encryption work?
I know I have not discovered a huge web vulnerability here! :) I just want to understand the logic behind password encryption.
I'm sure I'm understanding something wrong, and would appreciate if you could help me set my though and other's (I hope) straight.
How would you have to apply password encryption so that it is actually useful?
What about this idea?
As I said, I may/am getting the whole idea wrong, but, would this method add any security in security to a real environment?
$reenc = array(
"h38an",
"n28nu",
"fw08d"
);
$pass = "Trufa";
$enc = chunk_split(md5($pass),5,$reenc[mt_rand(0,count($reenc)-1)]);
echo $enc;
As you see, I randomly added arbitrary strings ($reenc = array()) to my md5() password "making it unique". This of course is just a silly example.
I may be wrong but unless you "seed the encryption yourself" it will always be easily reversible.
The above would be my idea of "password protecting" and encrypted password, If a hacker gets to it he wont be able to decrypt it unless he gets access to the raw .php
I know this might not even make sense, but I can't figure out why this is a bad idea!
I hope I've made myself clear enough, but this is a very long question so, please ask for any clarification needed!
Thanks in advance!!
You should have an encryption like md5 or sha512. You should also have two different salts, a static salt (written by you) and then also a unique salt for that specific password.
Some sample code (e.g. registration.php):
$unique_salt = hash('md5', microtime());
$password = hash('md5', $_POST['password'].'raNdoMStAticSaltHere'.$unique_salt);
Now you have a static salt, which is valid for all your passwords, that is stored in the .php file. Then, at registration execution, you generate a unique hash for that specific password.
This all ends up with: two passwords that are spelled exactly the same, will have two different hashes. The unique hash is stored in the database along with the current id. If someone grab the database, they will have every single unique salt for every specific password. But what they don't have is your static salt, which make things a lot harder for every "hacker" out there.
This is how you check the validity of your password on login.php for example:
$user = //random username;
$querysalt = mysql_query("SELECT salt FROM password WHERE username='$user'");
while($salt = mysql_fetch_array($querysalt)) {
$password = hash('md5',
$_POST['userpassword'].'raNdoMStAticSaltHere'.$salt[salt]);
}
This is what I've used in the past. It's very powerful and secure. Myself prefer the sha512 encryption. It's actually just to put that inside the hash function instead of md5 in my example.
If you wanna be even more secure, you can store the unique salt in a completely different database.
Firstly, "hashing" (using a cryptographic one way function) is not "encrypting". In encryption, you can reverse the process (decryption). In hashing, there is (theoretically) no feasible way of reversing the process.
A hash is some function f such that v cannot be determined from f(v) easily.
The point of using hashing for authentication is that you (or someone seeing the hash value) do not have any feasible way (again, theoretically) of knowing the password. However, you can still verify that the user knows his password. (Basically, the user proves that he knows v such that f(v) is the stored hash).
The weakness of simply hashing (aside from weak hash functions) is that people can compile tables of passwords and their corresponding hash and use them to (effectively) get the inverse of the hash function. Salting prevents this because then a part of the input value to the hash is controlled and so tables have to be compiled for that particular salt.
So practically, you store a salt and a hash value, and authenticate by hashing a combination of the salt and the password and comparing that with your hash value.
MD5 is a one way hashing function which will guard your original password more or less safely.
So, let's say your password is "Trufa", and its hashed version is 06cb51ce0a9893ec1d2dce07ba5ba710.
For example, when you sign in to a new webpage, they ask you for your username and password. When you write "Trufa" as your password, the value 06cb51ce0a9893ec1d2dce07ba5ba710 is stored in the database because it is hashed.
The next time you log in, and you write "Trufa", the hashed value will be compared to the one in the database. If they are the same, you are authenticated! Providing you entered the right username, of course.
If your password wasn't stored in its hashed form in database, some malicious person might run a query somehow on that database and see all real passwords. And that would be compromising.
Also, since MD5 is a 128 bit cryptographic function, there are 2^128-1 = 340282366920938463463374607431768211455 possible combinations.
Since there are more possible strings than this, it is possible that 2 strings will generate the same hash value. This is called a collision. And it makes sure that a hashed password cannot be uniquely reverse engineered.
The only vulnerability with salting is that you need to know what the salt is in order to reconstruct the hash for testing the password. This is gotten around by storing the entry in the authdb in the form <algorithm>$<salt>$<hash>. This way the authdb entry can be used by any code that has access to it.
You're missing the important step - the salt. This is a unique (per user, ideally) bit of extra data that you add to the password before hashing it.
http://en.wikipedia.org/wiki/Salt_%28cryptography%29
Your idea (salting) is well known and is actually well-implemented in the PHP language. If you use the crypt() function it allows you to specify a string to hash, a method to encrypt (in some cases), and a salt. For example,
$x = crypt('insecure_password', $salt);
Returns a hashed and salted password ready for storage. Passwords get cracked the same way that we check if they're right: we check the hash of what the user inputs against the hash of their password in the database. If they match, they're authenticated (AFAIK this is the most common way to do this, if not the only). Insecure passwords (like password) that use dictionary words can be cracked by comparing their hash to hashes of common passwords. Secure passwords cannot be cracked this way, but can still be cracked. Adding a salt to the password makes it much more difficult to crack: since the hacker most likely doesn't know what the salt is, his dictionary attack won't work.
For a decent hash the attacker won't be reversing the hash, they'll be using a rainbow table, which is essentially a brute-force method made useful if everyone uses the same hash function.
The idea of a rainbow table is that since hashing is fast I can hash every possible value you could use as a password, store the result, and have a map of which hash connects to which password. If everyone just takes their passwords and hashes them with MD5 then my hash table is good for any set of password hashes I can get my hands on!
This is where salting comes in. If I take the password the user enters and add some data which is different for every user, then that list of pre-determined hashes is useless since the hash is of both the password and some random data. The data for the salt could be stored right beside the password and even if I get both it doesn't help me get the password back since I still have to essentially brute force the hash separately for every single user - I can't form a single rainbow table to attack all the hashes at once.
Of course, ideally an attacker won't get the list of hashed passwords in the first place, but some employees will have access so it's not possible to secure the password database entirely.
In addition to providing salt (or seed), the md5 is a complex hashing algorithm which uses mathematical rules to produce a result that is specifically not reversable because of the mathematical changes and dataloss in throughput.
http://en.wikipedia.org/wiki/Cryptographic_hash_function
md5 (or better put: hash algorithms in general) are used to safely store passwords in database. The most important thing to know about hashes is: Hashes are not encryptions per se. (they are one-way-encryptions at most). If you encrypt something, you can get the data back with the key you used. A hash generates a fixed-length value from an arbitrary input (like a string), which can be used to see if the same input was used.
Hashes are used to store sensitive, repeatly entered data in a storage device. Doing this, nobody can recreate the original input from the hash data, but you can hash an incoming password and compare it to the value in the database, and see if both are the same, if so, the password was correct.
You already pointed out, that there possibilites to break the algorithm, either by using a database of value/hash pairs or producing collisions (different values resulting in the hash value). You can obscure this a bit by using a salt, thus modifying the algorithm. But if the salt is known, it can be used to break the algorithm again.
I like this question. But I think you've really answered yourself.
The site you referenced uses dictionary lookups of known, unsalted, md5's - it doesn't "crack" anything.
Your example is almost good, except your application needs to be able to regenerate the md5 using the same salt every time.
Your example appears to use one of the random salts, which will fail 2 of 3 times if you try to compare a users password hash to something input.
People will tell you to also use SHA1 or SHA256 to be have a 'stronger' hash - but people will also argue that they're all 'broken.'
That documentation is misleading -- it teaches a "vulnerable" concept and presents it as somehow being "secure" because it (the saved password) looks like gibberish. Just internet junk that won't die. The following link should clear things up (you have already found a good bit of it though, it seems. Good work.)
Enough With The Rainbow Tables: What You Need To Know About Secure Password Schemes talks about MD5 (and why it should not be used) along with salt (e.g. how to thwart rainbow attacks) as well as provides useful insights (such as "Use someone else’s password system. Don’t build your own"). It is a fairly good overview.
This is my question about the aspects of md5 collision, slightly related to your question:
Is there any difference between md5 and sha1 in this situation?
The important part is in the first 3 rows, that is: you must put your salt before the password, if you want to achieve stronger protection, not after.
To simply answer the title of your question, md5's only real use nowadays is for hashing large strings (such as files) to produce checksums. These are typically used to see if both strings are identical (in terms of files, checksums are frequently used for security purposes to ensure a file being distributed hasn't been tampered with, for example).
To address each of your inline questions:
How does password encryption work?
How would you have to apply password encryption so that it is actually useful?
Secure password hashing works by taking the password in plain text form, and then applying a costly hashing function to it, salted with a cryptographically secure random salt to it. See the Secure hash and salt for PHP passwords question for more detail on this.
What about this idea?
Password hashing does not need to be complicated like that, and nor should it be. Avoid thinking up your own algorithms and stick with the tried and tested hashing algorithms already out there. As the question linked above mentions, md5() for password hashing has been obsolete for many years now, and so it should be avoided.
Your method of generating a "random" salt from an array of three different salts is not the randomness you're looking for. You need unique randomness that is suitable for cryptographically secure (i.e. using a cryptically secure pseudo-random number generator (CSPRNG)). If you're using PHP 7 and above, then the random_bytes function can be used to generate a cryptographically secure salt (for PHP 5 users, the random_compat library can be used).