Microsoft has changed and redone the activation rules with the release of Windows 10. The new rules makes reinstalling Windows significantly easier compared to previous versions of Windows such as 8.1 and 7.
Perhaps the biggest change is the fact that your activation status is stored in the cloud, so that way you don't need your product key when you reinstall Windows 10. Every time you reinstall Windows 10, the device is activated automatically. Previously, every time you needed to install Windows, you needed the product key unless you had an UEFI-based laptop with Windows 8.1 pre-installed.
When you reinstall Windows 10, it will still ask your for your product key (twice, in fact) but you can go ahead and skip. Your device will still be activated because Windows 10 recognizes that it was once installed on the hardware once before.
For a long time, Microsoft's activation servers have relied on a unique ID based on the hash of your hardware. The hash was supposedly irreversible and was not tied to any Microsoft services. In other words, it identifies the device, but not the person using the device. In previous versions of Windows, when activated for the first time, the hashed value (a.k.a. the installation ID) was recorded in the activation database beside the product key entered during installation. So when consumers tried to reinstall the same Windows on the same hardware, the product key activated automatically.
When users upgrade to Windows 10, the Windows 10 setup program checks the activation status of Windows and reports it to the activation servers. The Windows activation server generates a license certificate that is stored alongside the hardware's hash and the version of Windows 10 Home or Pro that was just activated. No product key was needed, only proof that the Windows was legitimate (via the Software Licensing Manager utility).
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