Use this: https://github.com/ncb000gt/node.bcrypt.js/

bcrypt is one of just a few algorithms focused on this use case. You should never be able to decrypt your passwords, only verify that a user-entered cleartext password matches the stored/encrypted hash.

bcrypt is very straightforward to use. Here is a snippet from my Mongoose User schema (in CoffeeScript). Be sure to use the async functions as bycrypt is slow (on purpose).

class User extends SharedUser

  defaults: _.extend {domainId: null}, SharedUser::defaults



  #Irrelevant bits trimmed...



  password: (cleartext, confirm, callback) ->

    errorInfo = new errors.InvalidData()

    if cleartext != confirm

      errorInfo.message = 'please type the same password twice'

      errorInfo.errors.confirmPassword = 'must match the password'

      return callback errorInfo

    message = min4 cleartext

    if message

      errorInfo.message = message

      errorInfo.errors.password = message

      return callback errorInfo

    self = this

    bcrypt.gen_salt 10, (error, salt)->

      if error

        errorInfo = new errors.InternalError error.message

        return callback errorInfo

      bcrypt.encrypt cleartext, salt, (error, hash)->

        if error

          errorInfo = new errors.InternalError error.message

          return callback errorInfo

        self.attributes.bcryptedPassword = hash

        return callback()



  verifyPassword: (cleartext, callback) ->

    bcrypt.compare cleartext, @attributes.bcryptedPassword, (error, result)->

      if error

        return callback(new errors.InternalError(error.message))

      callback null, result

Also, read this article, which should convince you that bcrypt is a good choice and help you avoid becoming well and truly effed.