The correct answer is 'Implement bcrypt with a dynamic salt for hashing each user's password.' The use of bcrypt is recommended because it is a slow hashing function specially designed for password storage. It incorporates a salt to protect against rainbow table attacks and has the ability to scale the hashing difficulty with work factors to defend against brute force attacks. The use of MD5 or any fast hashing algorithm, even with a dynamic salt, is inappropriate for password storage due to their vulnerability to brute force attacks and fast hashing speeds, which facilitate cracking efforts.