How to hash a password

Most of the other answers here are somewhat outdated considering today's best practices.

The most robust password-hashing algorithm that's natively available in .NET is PBKDF2, represented by the Rfc2898DeriveBytes class. The following code is in a stand-alone class in this post: Another example of how to store a salted password hash. The basics are really easy, so here it is broken down:

STEP 1 Create the salt value with a cryptographic PRNG:

byte[] salt;
new RNGCryptoServiceProvider().GetBytes(salt = new byte[16]);

STEP 2 Create the Rfc2898DeriveBytes and get the hash value:

var pbkdf2 = new Rfc2898DeriveBytes(password, salt, 100000);
byte[] hash = pbkdf2.GetBytes(20);

STEP 3 Combine the salt and password bytes for later use:

byte[] hashBytes = new byte[36];
Array.Copy(salt, 0, hashBytes, 0, 16);
Array.Copy(hash, 0, hashBytes, 16, 20);

STEP 4 Turn the combined salt+hash into a string for storage

string savedPasswordHash = Convert.ToBase64String(hashBytes);
DBContext.AddUser(new User { ..., Password = savedPasswordHash });

STEP 5 Verify the user-entered password against a stored password

/* Fetch the stored value */
string savedPasswordHash = DBContext.GetUser(u => u.UserName == user).Password;
/* Extract the bytes */
byte[] hashBytes = Convert.FromBase64String(savedPasswordHash);
/* Get the salt */
byte[] salt = new byte[16];
Array.Copy(hashBytes, 0, salt, 0, 16);
/* Compute the hash on the password the user entered */
var pbkdf2 = new Rfc2898DeriveBytes(password, salt, 100000);
byte[] hash = pbkdf2.GetBytes(20);
/* Compare the results */
for (int i=0; i < 20; i++)
    if (hashBytes[i+16] != hash[i])
        throw new UnauthorizedAccessException();

Note: Depending on the performance requirements of your specific application, the value 100000 can be reduced. A minimum value should be around 10000.

Based on csharptest.net's great answer, I have written a Class for this:

public static class SecurePasswordHasher
{
    /// <summary>
    /// Size of salt.
    /// </summary>
    private const int SaltSize = 16;

    /// <summary>
    /// Size of hash.
    /// </summary>
    private const int HashSize = 20;

    /// <summary>
    /// Creates a hash from a password.
    /// </summary>
    /// <param name="password">The password.</param>
    /// <param name="iterations">Number of iterations.</param>
    /// <returns>The hash.</returns>
    public static string Hash(string password, int iterations)
    {
        // Create salt
        byte[] salt;
        new RNGCryptoServiceProvider().GetBytes(salt = new byte[SaltSize]);

        // Create hash
        var pbkdf2 = new Rfc2898DeriveBytes(password, salt, iterations);
        var hash = pbkdf2.GetBytes(HashSize);

        // Combine salt and hash
        var hashBytes = new byte[SaltSize + HashSize];
        Array.Copy(salt, 0, hashBytes, 0, SaltSize);
        Array.Copy(hash, 0, hashBytes, SaltSize, HashSize);

        // Convert to base64
        var base64Hash = Convert.ToBase64String(hashBytes);

        // Format hash with extra information
        return string.Format("$MYHASH$V1${0}${1}", iterations, base64Hash);
    }

    /// <summary>
    /// Creates a hash from a password with 10000 iterations
    /// </summary>
    /// <param name="password">The password.</param>
    /// <returns>The hash.</returns>
    public static string Hash(string password)
    {
        return Hash(password, 10000);
    }

    /// <summary>
    /// Checks if hash is supported.
    /// </summary>
    /// <param name="hashString">The hash.</param>
    /// <returns>Is supported?</returns>
    public static bool IsHashSupported(string hashString)
    {
        return hashString.Contains("$MYHASH$V1$");
    }

    /// <summary>
    /// Verifies a password against a hash.
    /// </summary>
    /// <param name="password">The password.</param>
    /// <param name="hashedPassword">The hash.</param>
    /// <returns>Could be verified?</returns>
    public static bool Verify(string password, string hashedPassword)
    {
        // Check hash
        if (!IsHashSupported(hashedPassword))
        {
            throw new NotSupportedException("The hashtype is not supported");
        }

        // Extract iteration and Base64 string
        var splittedHashString = hashedPassword.Replace("$MYHASH$V1$", "").Split('$');
        var iterations = int.Parse(splittedHashString[0]);
        var base64Hash = splittedHashString[1];

        // Get hash bytes
        var hashBytes = Convert.FromBase64String(base64Hash);

        // Get salt
        var salt = new byte[SaltSize];
        Array.Copy(hashBytes, 0, salt, 0, SaltSize);

        // Create hash with given salt
        var pbkdf2 = new Rfc2898DeriveBytes(password, salt, iterations);
        byte[] hash = pbkdf2.GetBytes(HashSize);

        // Get result
        for (var i = 0; i < HashSize; i++)
        {
            if (hashBytes[i + SaltSize] != hash[i])
            {
                return false;
            }
        }
        return true;
    }
}

Usage:

// Hash
var hash = SecurePasswordHasher.Hash("mypassword");

// Verify
var result = SecurePasswordHasher.Verify("mypassword", hash);

A sample hash could be this:

$MYHASH$V1$10000$Qhxzi6GNu/Lpy3iUqkeqR/J1hh8y/h5KPDjrv89KzfCVrubn

As you can see, I also have included the iterations in the hash for easy usage and the possibility to upgrade this, if we need to upgrade.

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If you are interested in .net core, I also have a .net core version on Code Review.