Short for Wi-Fi Protected Access 2 - Pre-Shared Key, and also called WPA or WPA2 Personal, it is a method of securing your network using WPA2 with the use of the optional Pre-Shared Key (PSK) authentication, which was designed for home users without an enterprise authentication server.
To encrypt a network with WPA2-PSK you provide your router not with an encryption key, but rather with a plain-English passphrase between 8 and 63 characters long. Using a technology called TKIP (for Temporal Key Integrity Protocol), that passphrase, along with the network SSID, is used to generate unique encryption keys for each wireless client. And those encryption keys are constantly changed. Although WEP also supports passphrases, it does so only as a way to more easily create static keys, which are usually comprised of the hex characters 0-9 and A-F.
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