How should a backend store user passwords?

Never store the password itself. Store the output of a slow, salted password hash, so a stolen database does not hand attackers the passwords.

Why the simpler options fail:

• Plain text or reversible encryption: one leak or one stolen key exposes everyone.
• Fast hashes such as MD5 or SHA-256: a GPU tries billions of guesses per second, and precomputed rainbow tables work when there is no salt.

What to do instead:

1. Use argon2id, or bcrypt or scrypt where argon2 is unavailable. These are deliberately slow and memory-hungry, with a cost setting you raise over time.
2. Use a unique random salt per password, so identical passwords produce different hashes. Modern libraries generate it and embed it in the hash string.
3. Verify with the library's compare function, which runs in constant time.
4. Let users choose long passphrases, check new passwords against breach lists, and skip arbitrary composition rules.
5. Add MFA, because a good hash still cannot save a weak or reused password.

Takeaway: use a maintained library, let it handle salt and parameters, and never invent your own scheme.