Please explain so I may better understand why developing a challenge-response authentication system is necessary. Solutions reliant on passwords are far less secure than the one used here?

Management Of Information Security
6th Edition
ISBN:9781337405713
Author:WHITMAN, Michael.
Publisher:WHITMAN, Michael.
Chapter12: Protection Mechanisms
Section: Chapter Questions
Problem 1RQ
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Please explain so I may better understand why developing a challenge-response authentication system is necessary. Solutions reliant on passwords are far less secure than the one used here?

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