What distinguishes MS-CHAP from standard CHAP?

MS-CHAP is a variation of the Challenge Handshake Authentication Protocol (CHAP) that incorporates specific enhancements and modifications designed to improve security and compatibility, particularly for Microsoft systems. One of the key distinctions lies in the cryptographic hash function it employs. While standard CHAP uses MD-5 hashing, MS-CHAP utilizes MD-4. This choice makes MS-CHAP particularly aligned with Microsoft's authentication technologies and its environment, allowing for different security levels and responses to authentication challenges.

This change in the hashing algorithm reflects a shift in how authentication data is processed and provides a different method of generating and verifying the challenge-response pairs between the client and server. Such an adaptation is crucial for ensuring that MS-CHAP meets the specific authentication needs of Microsoft environments, including Windows networking.

The other options do not accurately capture the primary distinction relevant to the hashing algorithms when comparing MS-CHAP to CHAP, as MS-CHAP does not specifically require two-factor authentication or is limited to wireless networks, nor does it eliminate nonce usage in its protocol. The correctness of the answer illustrates its technical emphasis on cryptographic differences which is essential for understanding how these protocols function in secure communications.