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The certificate-based authentication for Azure IoT works like this:

• A root certificate , signed by a certificate authority, used to sign device certificates will be created and added into Azure IoTHub
• For each IoT device we want to authenticate, we will create a separate client certificate, signed by the same certificate authority.
• At the time of the authentication, our IoT device will present the client certificate as the proof of identity.
• Azure IoT Hub will verify the identity based on the root certificate and the device name.

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