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setting type to hashed seems to not allow enablePasswordRetrieval. what if a user forgot their password?

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When a hashed password is lost, the only option is to create a new one. Either by the user or by an administrator(-tool).

A common practice is to send a link to a secured page where the user can enter a new password.

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Hashes are not-reversible to their native form, which is why password recovery is not possible. If this is a requirement you will need to use encryption instead. To do this, change passwordFormat="Hashed" to passwordFormat="Encrypted"

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