Nginx gives an Internal Server Error 500 after I have configured basic auth

Question

I am trying to do basic auth on Nginx. I have version 1.9.3 up and running on Ubuntu 14.04 and it works fine with a simple html file.

Here is the html file:

Answer 1

In my case, I was using plain text password by -p flag, and coincidentally my password start with $ character. So I updated my password and thus the error was gone.

NB: Other people answer helped me a lot to figure out my problem. I am posting my solution here if anyone stuck in a rare case like me.