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As far as I know WinRar uses the password you type and derives the key from it. But how exactly does it check if the key I typed is correct? What I think is that it compares your guess with the right key before decrypting it? But that'd mean that the right is stored inside the encrypted file. So it doesn't make much sense. Can someone explain how it is done?

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WinRAR does not check a password at all. It passes a password through the hash function to set a 128/256 Bit AES encryption key and then uses this key to encrypt the file data valid until RAR 4.x format. The new RAR 5.x format detects wrong passwords even before starting extraction and does not extract garbage. RAR 5.x stores a special password hash generated by one way hash function. Consequently the knowledge of this hash does not allow to know a password of the encryption key. When password is entered RAR compares its hash to stored hash in case of no match it rejects the wrong password early. This one way hash function is intentionally slow and based on PBKDF2, therefore it does not allow to increase the brute force attack performance noticeably.

Here is the source.

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