Obfuscating the algorithm or hiding an encryption key within your software is really out of the question if you are serious about controlling licensing. Only your company should be able to generate license keys for your products, even if someone completely reverse engineers your products (which WILL happen, I speak from experience). Ideally, you would want your license keys to have the following properties: And it's a pity, because for companies, license keys have almost the same value as real cash. There are many ways to generate license keys, but very few of those ways are truly secure.
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