A challenge response scheme authenticates a requesting device by an authenticating device. The authenticating device generates and issues a challenge to the requesting device. The requesting device combines the challenge with a hash of a password provided by a user, and the combination is further hashed in order to generate a requesting encryption key used to encrypt the user supplied password. The encrypted user supplied password is sent to the authenticating device as a response to the issued challenge. The authenticating device generates an authenticating encryption key by generating the hash of a combination of the challenge and a stored hash of an authenticating device password. The authenticating encryption key is used to decrypt the response in order to retrieve the user-supplied password. If the user-supplied password hash matches the stored authenticating device password hash, the requesting device is authenticated and the authenticating device is in possession of the password.