"Corrupted key" error when creating/updating SQL Server 2012 credential for proxy account Following a restart of a SQL Server 2012 SP3 instance caused by a reboot of the unresponsive host WINTEL server, I have a SQL Agent Log Shipping Copy job (which uses a proxy account to access the NAS file-share where the log backups reside) that is failing with this error:


  Error authenticating proxy MyDomain\MyProxyAccount, system error: The user name or password is incorrect.


I have attempted to reapply the correct password to the proxy’s Credential and to recreate a new Credential and both fail with this error:


  A key required by this operation appears to be corrupted. (Microsoft SQL Server, Error: 15507)


I’ve read an MSDN page that says: 


  SQL Server uses encryption keys to help secure data, credentials, and connection information that is stored in a server database. The Service Master Key is automatically generated the first time the SQL Server instance is started and is used to encrypt a linked server password, credentials, and the database master key.


I’m uncertain how to proceed. Do I have a problem with the Service Master Key? If so, can anyone suggest how to resolve this issue or direct me to further reading online?

Update: I've found entries in the SQL Server log (written when the instance was restarted following the host WINTEL server reboot) that further suggest that the issue lies with the Service Master Key:


  Service Master Key could not be decrypted using one of its encryptions.
  An error occurred during Service Master Key initialization. 


I'd still welcome any suggestions on how to fix this...
I am going to attempt to answer my own question (as my experience may help others). Firstly, regarding the issue I experienced, I found this blog helpful (as were the comments from Sean Gallardy above).

As I had no Service Master Key (SMK) backup to restore from, my intention was to regenerate a new SMK using the ALTER SERVICE MASTER KEY REGENERATE with the FORCE option (causing loss of encrypted entities). I was prepared to have to recreate my credential secrets and Linked Server passwords. This instance had no Database Master Keys but, had it done so, I could have opened them using their password and regenerated them by the SMK (thus avoiding data loss).

However, I decided first to see if a simple restart of the SQL Server instance would resolve the issue - and it did! Upon restart, the Service Master Key verified successfully (and I confirmed this by creating a new test credential successfully).

My best guess is that whatever issue prevented the SMK verification previously (causing the "Service Master Key could not be decrypted using one of its encryptions" error log entry) had disappeared. I know that the SMK always has two encryptions: the machine key encryption and the service account encryption (and these provide an either-or decryption method in the case of cluster failover or service account change). 

As the host WINTEL server was having issues, I imagine that invalidated the machine key encryption. I can't imagine what might have been invalidating the service account encryption (that account did not change) but whatever it was, it seemed to be a temporary problem. So my best guess is that, upon restart, the SMK was able to self-verify using the service account encryption (and, at that point, create a new machine key encryption).