Solutions to the equation $x^2=1$ in a cyclic group

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In a cyclic group, say $(\mathbb{Z}/p\mathbb{Z})^*$ where $p$ is a prime, why does the equation $x^2=1 \mod p$ only have two solutions?

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Because a quadratic equation in a field (more generally in an integral domain) has at most two roots. This is because $\alpha$ is a root of $p(x) \iff p(x) $ is divisble by $\;x-\alpha\;$ and $\;\deg p(x)q(x)=\deg p(x)+\deg q(x)$.