Security Analysis of PEAP-MSCHAPv2

The authentication protocol you use determines the strength of your organization’s security against the soaring number of cyberattacks these days. A protocol heavily dependent on passwords is always vulnerable to various cyberattacks. Even Microsoft Exchange has warned finance personnel to minimize the use of passwords as hackers easily target them during authentication for spray attacks. Since you are here, the chances are fair that you are concerned about your company’s network security and looking to explore more robust defenses, and even if you are not, we suggest it’s high time you do so. While there are numerous protocols to choose from for your organization’s WPA2-Enterprise network security, the Extensible Authentication Protocols (EAP) are the most common. In this article we will thoroughly analyze the security mechanisms of one of the widely used authentication protocols, PEAP-MSCHAPv2. We explain how MS-CHAPv2 works, what PEAP-MS-CHAPv2 is, and how to evaluate the one best suited for your organization.

What Is MSCHAPv2 and What Is It Used For?

MS-CHAPv2 (Microsoft Challenge Handshake Authentication Protocol, version 2) is a network security protocol developed by Microsoft, used to validate user or device credentials. Here’s how it works:

• The authenticator creates a challenge, which it delivers to the client or device seeking to join the network.
• The client then generates a hashed response derived from its password; the plaintext password is never openly shared over the network.
• Based on that response, the authentication server decides whether to grant network access.

MS-CHAP is widely used in enterprise Wi-Fi networks and virtual private network (VPN) connections. However, because it is password-based and has cryptographic vulnerabilities, intruders can use stolen credentials to fraudulently access the network.

What Is Extensible Authentication Protocol (EAP)?

The EAP authentication method uses an encrypted EAP tunnel to provide a safer path for communication between the client and server.

In this tunnel, a chain of trust is established between the server certificate, intermediate certificate, and the client by validating the server with the help of the Root CA and the server certificate’s CN (Common Name).

There are many methods for authentication under the EAP protocol, but the most common methods used in modern wireless networking are:

• EAP-TLS
• PEAP-MSCHAPv2
• EAP-TTLS/PAP

These protocols have varying levels of security, as illustrated in the table below:

WPA2-Enterprise Protocols	Level of Encryption	Authentication Speed	Directory Support	Credentials
EAP-TLS	Public-Private Key Cryptography	Fast – 12 Steps	SAML/LDAP/MFA	Passwordless
PEAP-MSCHAPv2	Encrypted Credentials	Slow – 22 Steps	Active Directory	Passwords
EAP-TTLS/PAP	Non-Encrypted Credentials	Slowest – 25 Steps	Non-AD LDAP Servers	Passwords

What Is PEAP-MSCHAPv2 And What Is It Used For?

PEAP-MS-CHAPv2 (Protected Extensible Authentication Protocol – Microsoft Challenge Handshake Authentication Protocol version 2) is a password-based authentication method. It combines a challenge-response handshake with a layer of encryption to protect client-server communications. The protocol also includes a mutual authentication process. PEAP-MS-CHAPv2 is widely used to authenticate enterprise wireless networks, in settings like universities and corporate offices. The protocol consists of two layers:

• PEAP (Protected Extensible Authentication Protocol): The outer layer, which creates an encrypted tunnel to protect private data sent between the client and the authentication server
• MS-CHAPv2 (Microsoft Challenge Handshake Authentication Protocol Version 2): The inner layer, which uses a challenge-response handshake to verify the client’s credentials

The protocol is generally secure, but it has a growing number of security challenges. It is vulnerable to “evil twin” and dictionary attacks, for example.

Is PEAP-MS-CHAPv2 Encrypted?

PEAP-MS-CHAPv2 includes encryption in its outer layer. The Protected Extensible Authentication Protocol (PEAP) uses an encrypted tunnel to protect the data exchanged by the client and server. However, this encryption does not extend to the authentication method itself. The inner layer – MS-CHAPv2 – uses relatively weak, cryptographic methods. This leaves the protocol vulnerable to evil twin attacks, where attackers can intercept handshake traffic by gaining control over an access point.

High-Level Security Analysis of PEAP-MSCHAPv2

MSCHAPv2 is a Point-to-Point Protocol (PPP) that provides a standardized technique for moving multi-protocol datagrams across point-to-point links. For creating and setting various network-layer protocols, PPP offers an extensible Link Control Protocol and a series of Network Control Protocols (NCPs).

MS-CHAPv2 is the second iteration of the challenge handshake mutual authentication protocol.

Breakthroughs in encryption technology have rendered older versions like MS-CHAP-v1 obsolete. Standard CHAP and MS-CHAP-v1 are both compatible with MS-CHAP-v2 except in some exceptional cases.

How Does MSCHAPv2 Work?

In LCP option 3, Authentication Protocol, MS-CHAPv2 is activated by negotiating CHAP Algorithm 0x81. A peer challenge and an authenticator answer are overlaid onto the “Response” and “Success” packets to facilitate mutual authentication between peers. The term “challenge handshake” sums up how MSCHAPv2 functions.

• The remote access server challenges a user when they authenticate to the network.
• The client simultaneously transmits its own challenge to the server.
• The server must demonstrate that it knows the user’s password by answering the client’s challenge.
• The client cuts off the connection automatically if the server cannot accomplish this.

The server and the client concurrently authenticate one another. This ensures that the user only connects to the correct server and that all participating devices have mutual trust.

Evolution of MSCHAPv2 to PEAP-MSCHAPv2

Since it was clear that MSCHAPv2’s encryption technique was insecure due to the usage of passwords, employing more secure encryption looked like a straightforward remedy. MSCHAPv2 became PEAP-MSCHAPv2 once Transport Layer Security (also known as TLS) was added to it. The TLS handshake is a process that involves communication and negotiation between the client and server in the sessions to perform the data exchange using encrypted keys. The diagram above illustrates how the EAP-PEAP authentication process uses a TLS handshake.

Info: Both the peer and server must agree on the TLS protocol and cipher suite to verify digital certificates.

PEAP-MSCHAPv2 still uses the same vulnerable MD4 hashing algorithm as its predecessor, MS-CHAPv2. However, TLS has been added to further secure the credentials sent during the handshake procedure. Even with the addition of TLS, it is self-evident that PEAP-MSCHAPv2 is not a protocol one can rely upon in the long term. So let’s look at some of the drawbacks of PEAP-MSCHAPv2 and how they can be minimized in the subsequent sections.

Drawbacks of PEAP-MSCHAPv2

Microsoft’s advice for defending devices depends on the usage of server certificate validation. This protocol is active when a user tries to connect to the network.

• The RADIUS server possesses a recognized and trustworthy certificate created by the IT department or a public Certificate Authority.
• Server certificate validation is integral to security when using PEAP-MSCHAPv2.

By confirming that the RADIUS server has the trusted certificate, which attests to the legitimacy of the network and connects the device to the network, server certificate validation eliminates over-the-air credential theft.

Warning: Users and devices can have their Active Directory or LDAP credentials stolen by a man-in-the-middle attack if the server certificate is not verified.

When doing MITM, the attacker often configures an evil twin access point, and a RADIUS server spoofs the target SSID and broadcasts a potent signal to deceive victims’ devices into connecting to a malicious SSID. The image below illustrates what that looks like. You might struggle to accurately configure the server certificate validation procedure on your own since it is device-specific and complex.

Warning: Users who manually configure their own devices run the risk of overlooking server certificate verification and unintentionally trusting malicious networks.

Best Substitute for PEAP-MSCHAPv2

EAP-TLS authentication is a certificate-based authentication system that utilizes X.509 digital certificates instead of credentials, providing an extra degree of cryptographic security. [BLOCK QUOTE STYLE: BASE] Asymmetric cryptography is an advanced cryptographic infrastructure that securely exchanges encrypted information publicly between two parties without the fear of interception. Unlike symmetric encryption, where the exchange of private keys is mandatory to initiate communication between two parties, asymmetric encryption uses two pairs of public and private keys separately. The strength of the encryption makes it impossible to crack without knowing the hidden private key, so even intercepted communication is safe from prying eyes.

Benefits of EAP-TLS

The main advantages of EAP-TLS that stand out from the other protocols are:

• Improved authentication performance
• Modern cloud integrations
• Simpler user experience

Improved Authentication Performance

EAP-TLS is more suited for large organizations with many authentication events because its authentication flow is simpler than the alternatives. There are fewer chances for the RADIUS server to get overloaded and drop a connection, ultimately leading to a better user experience. Having fewer authentication steps also means you can authenticate the network faster, leading to a better user experience.

Modern Cloud Integrations

One of the most significant benefits of EAP-TLS is that it can be extended to modern cloud infrastructures like Azure AD and Okta. Other auth protocols like MS-CHAPv2/PAP were designed for on-premises environments and lack the support or rigor necessary for today’s cloud environment.

Simpler User Experience

Since EAP-TLS primarily deals with certificates, there are hardly any of the downsides associated with passwords, like password reset policies. If you choose a proficient certificate authority, then even the certificate management will be fully automatic and hassle-free for your enterprise.

Why Isn’t EAP-TLS More Widely Used?

Despite the fact that EAP-TLS significantly increases network security, we have seen some reluctance to deploy it because of its reputation for complexity. Users may become frustrated if you need them to configure their devices for EAP-TLS all at once, even your help desk employees.

Note: An excellent strategy is to shift gradually, migrating user groups one at a time instead of everyone at once.

Also, while working to increase network security is a great aim, your network will be useless if your users cannot access it. Continue supporting EAP-TTLS/PAP and EAP-TLS on a single SSID to ease the transition. You also need a high level of specialized knowledge while configuring a PKI. Connecting it to multiple platforms for last-mile distribution might be challenging. These PKIs seem to have problematic management on a daily basis.

Improve Security Without Adding On-Premises Infrastructure

EAP-TLS delivers secure, reliable connectivity, closing the gap left by password-based authentication methods. But traditional deployments often come with costly on-premises PKI and RADIUS infrastructure, along with the ongoing challenge of managing certificate issuance, renewal, and revocation at scale. SecureW2 was built specifically to make EAP-TLS practical for IT teams without a dedicated PKI team.  Our JoinNow platform delivers secure certificate enrollment for both managed and unmanaged devices through modern methods such as ACME Device Attestation (ACME DA), Dynamic SCEP, and SAML-based authentication. Combined with Cloud RADIUS and real-time policy enforcement, it enables scalable EAP-TLS deployments across major operating systems and device environments. See EAP-TLS deployment in action.

Frequently Asked Questions

What is MS-CHAPv2?

MS-CHAPv2 (Microsoft Challenge Handshake Authentication Protocol version 2) is a network authentication protocol which is widely used to verify users and devices seeking to join a wireless network. The protocol, developed by Microsoft, is password-based and is vulnerable to dictionary attacks, evil twin attacks, and other infiltration strategies. MS-CHAPv2 uses a challenge-response method to verify users. The authentication server sends a “challenge” to the client, who then returns a hashed response derived from its password. MS-CHAPv2 also offers mutual authentication, enabling clients to verify the server’s identity.

What are the key differences between PEAP and MS-CHAPv2?

PEAP and MS-CHAPv2 perform very different functions in network security. Together, they act as a highly effective network security protocol. PEAP creates a secure, encrypted Transport Layer Security (TLS) tunnel, protecting data exchanged between clients and authentication servers. PEAP is the outer wrapper in the PEAP-MSCHAPv2 protocol. MS-CHAPv2 is a password-based challenge-response authentication protocol. It validates client credentials using shared secrets and hashes. MS-CHAPv2 acts as the inner layer in the PEAP-MSCHAPv2 protocol.

How do PEAP and MS-CHAP work together?

PEAP and MS-CHAP work together to securely validate users seeking access to private wireless networks. PEAP adds a layer of security to the MS-CHAP authentication protocol. The Protected Extensible Authentication Protocol (PEAP) creates an encrypted tunnel protecting the data exchanged between the client and the server; this makes it difficult for bad actors to steal usernames and passwords exchanged over the network. MS-CHAP enables secure authentication through a challenge-response process, in which the authentication server issues a challenge, and the client responds with a hash derived from its password.