What Is Blockchain Hashing? - Coindoo
Blockchain Hashing

What Is Blockchain Hashing?

Editorial Team Avatar
May 24, 2024
11 min reading time

After 15 years since the first cryptocurrency was released, it is safe to say that we got used to the concept of blockchain, and in most cases, we know at least the basics of blockchain technology. 

And while blockchain was made popular by the crypto industry, it can be used in so many other fields, including retail, healthcare, voting procedures, communication, and more. 

Now, all these industries choose to leverage blockchain technology for one main reason: its advantages, such as decentralization, high security and transparency, and a safe way to store data. 

Have you ever wondered about the process by which data is stored on a specific blockchain? Well, it’s called blockchain hashing, and this is what we will discuss in this article. 

What Is a Hash? Hash Functions and Cryptocurrency Mining

What Is a Hash

In blockchain technology, hashes are data structures that act as digital fingerprints on the block where certain data is added. The hash can be used to verify whether a piece of information was changed or tampered with after being stored. A blockchain hash is generated automatically, providing a fixed-length output for any given input value. 

In simple terms, a hash function takes input data of variable lengths and types and converts it into a fixed-size string of characters, known as the hash value. This process ensures that even the smallest change in the input data will produce a completely different hash value. This property of hash functions makes them essential for data authenticity and integrity in blockchain technology. 

Cryptographic hash functions are designed to be impossible to reverse. These secure hash functions are crucial in maintaining the security of blockchain networks. This is basically how and why a blockchain is so secure.  

Uses of Hash Functions in Blockchain

Hash functions are used in blockchain for various purposes, including: 

  • Data integrity: Ensuring that the data stored on the blockchain has not been altered; 
  • Transaction verification: Validating new crypto transactions by checking their hash values; 
  • Mining: Creating new blocks through the mining process, which involves solving hash functions; 
  • Digital signatures: Providing secure digital signatures to validate the authenticity of data and transactions. 

How Hashes Work

Hashes work by taking an input value and running it through a hashing algorithm to produce a fixed-length output. For instance, SHA-256 (Secure Hash Algorithm 256-bit, one of the most popular hashing algorithms) is commonly used in blockchain technology.  

SHA-256 takes an input and produces a 256-bit hash value, a fixed-length string of characters. This hash value serves as a unique digital fingerprint of the input data. 

A hash function generates a hash value when new data is added to a blockchain. If any part of the input data changes, the resulting hash value will be completely different, thus indicating that the data has been tampered with. This feature of hash functions makes them ideal for maintaining data authenticity in a blockchain system.

How Is a Hash Calculated?

Calculating a hash involves the following steps: 

1. The computer provides the input data: The original data that needs to be hashed; 

2. The hash function processes the data: The specific hashing algorithm used to process the input data; 

3. The algorithm offers the fixed-length hash output: The resulting fixed-length string, or hash value, produced by the hash function. 

For example, when using the SHA-256 algorithm, the input data, regardless of size, will transform into a 256-bit hash value. This process is fast and efficient, making it suitable for real-time applications in blockchain technology. 

Which Hashing Algorithm Is Used in Blockchain Technology?

The most commonly used hash function in blockchain technology is the SHA-256 algorithm. Developed by the National Security Agency (NSA), SHA-256 is known for its security and efficiency. It produces a fixed-length output of 256 bits, ensuring data integrity and security. This algorithm is widely used in Bitcoin and other cryptocurrencies for transaction verification, mining, and creating new blocks. 

Mining and Hashing

In the crypto space, mining involves solving complex mathematical problems based on hash functions. Miners use computational power to find a valid hash for the new block that meets the network’s difficulty criteria. This process, known as Proof of Work (PoW), ensures that only valid transactions are added to the blockchain and helps maintain the network’s security and integrity. 

When a miner successfully solves a hash problem, they add the new block to the blockchain, including the hash of the previous block, transaction data, and a unique hash for the new block. This links the blocks together, forming a secure and immutable chain of data.

Types of Cryptographic Hash Functions

A cryptographic hash function is categorized based on its security and performance characteristics. The most secure hash functions are designed to be resistant to attacks such as collision, preimage, and second preimage attacks. Some common types of cryptographic hash functions used in blockchain include:  

1. SHA-256: The Secure Hash Algorithm 256-bit is one of the most widely used hashing algorithms in blockchain technology. It produces a 256-bit hash value and is known for its high security and resistance to attacks. It is the hashing algorithm used by Bitcoin to secure the data stored in each block;

2. SHA-3: This is the latest member of the Secure Hash Algorithm family, providing stronger security features and different internal structures compared to its predecessors. It’s used when an even higher level of security is required; 

3. RIPEMD-160: A shorter hash function often used in conjunction with SHA-256 in certain cryptocurrency wallets. It generates a 160-bit hash value, offering a good balance between speed and security; 

4. BLAKE2: Known for its high speed and high security, BLAKE2 is an improvement on the BLAKE algorithm. It is often used for its performance in software implementations; 

5. Scrypt: This hashing algorithm incorporates a memory-hard hashing algorithm, which means it requires a significant amount of RAM to compute. This property makes it resistant to large-scale hardware attacks, as the cost of the hardware to break the hash would be extremely high. Scrypt is used by cryptocurrencies like Litecoin to add complexity to the mining process. 

Each of these hash functions has a specific role in ensuring data integrity, authenticating information, and preventing fraudulent transactions. Their ability to generate a unique hash value from given input data, despite the input data’s length or complexity, makes them essential to maintain the trust and security of a blockchain network. 

How Does Blockchain Hash Work?

A blockchain hash functions as a base brick of blockchain technology, ensuring data integrity and security throughout the system. When a block of transactions is created, all the transaction data within the block is processed through a cryptographic hash function.  

Each hash generated by such a mathematical function or algorithm is entirely unique; even the smallest change in the input data results in a completely different hash output, which is computationally impossible to predict or reverse-engineer. 

This unique property is critical in maintaining a blockchain’s integrity: each new block contains not only its own hash but also the hash of the previous block.  

This chaining technique ensures that any attempt to alter the information in one block will require recalculating or regenerating the hash for every subsequent block, which is practically impossible on a large scale due to the computational power needed.  

Thus, hashing helps confirm transactions, validate the authenticity of data, and secure the blockchain against fraudulent activities. 

Practical Applications of Hashing in Blockchain

Hashing in blockchain is not limited to securing transaction data. Its applications extend across various aspects of the technology to enhance security and functionality, such as: 

1. Digital signatures: Hashing combined with cryptographic techniques allows for the creation of digital signatures. In this case, hashing can be used to both create and verify a digital signature. Thus, when someone initiates a transaction (send crypto), they will have to sign it with their private key. This can be verified through a hashing function; 

2. Mining process: In the mining process, especially within systems that use a Proof of Work consensus mechanism, miners compete to solve a complex mathematical problem based on hashing. This practice is powered by a cryptographic function, too; 

3. Ensuring data authenticity: Hashing is crucial for ensuring that the data stored on the blockchain remains authentic. Users can verify whether data is original by checking the hash. The same input will always generate the same hash, but if data is altered, the output will be entirely different; 

4. Fraud prevention: Hashes help prevent fraud by making it (almost) impossible to alter any transaction data after it has been sealed into a block with a valid hash; 

5. Secure data storage: Some blockchain networks use hashes to securely store data such as passwords or personal information. By hashing this sensitive information, blockchains can provide the privacy and security everyone is looking for, ensuring that even if the data storage is compromised, the original information cannot be accessed as easily as in other situations. 

SHA-256 (Secure Hash Algorithm 256-bit)

SHA-256 is also called “Secure Hash Algorithm 256-bit” and is part of the “Secure Hashing Algorithm” family. It was developed by the National Security Agency in the United States. 

SHA-256 is a reinterpretation of SHA-2, another algorithm created by NSA in 2001. SHA-2 is as well another try to improve SHA-1, its predecessor. 

SHA-256 is one of the most secure hashing algorithms in the industry, being used by plenty of national agencies to protect sensitice data. With SHA-256, it is almost impossible to alter the data that is already stored in a block. Basically, someone would need to make 2^256 attempts to generate the initial data. Furthermore, SHA-256 makes it impossible to generate two messages with the same hash value. 

Preimage Resistance and Collision Resistance

Preimage resistance is one of the key properties that make a good hash function. It implies that if you know the hash (the output), you should find it extremely difficult, if not impossible, to figure out the original data that was put into the hash function to generate the output given.  

For example, if a hash function gives you “abc123” as a result, preimage resistance ensures that you can’t easily find out what the original data was. This is crucial for security, especially for keeping information like passwords safe. 

On the other hand, collision resistance ensures that it is very hard to find two different pieces of data that, when put through the same hash function, result in the same hash output.  

Collision resistance makes sure each input gives a unique output, which is vital for things like digital signatures and ensuring that each document or data piece remains distinct and is authentic. 


What’s the process of solving a hash?

Solving a hash basically implies getting a certain information through a hashing algorithm that transforms it into a hash suitable to store on a blockchain. 

What is the difference between encryption and hashing?

Hashing is a one-way process, meaning that you cannot “de-hash” data. On the other hand, through encryption, information is stored in a way that makes it possible to decrypt it and transform it again into readable data. 

How does Proof of Work relate to hashing in blockchain?

In proof of work consensus mechanisms, users leverage hashing algorithms to solve complex mathematical functions that imply transforming transaction data into hashes that can be stored in a block and cannot be tampered with. 

In Conclusion

Hashing is a concept that proved to be useful and even vital in many industries, just as blockchain does. It can be used to verify or validate data and transactions stored on a blockchain network, as well as to keep sensitive information safe. 

The most important advantage of blockchain hashing is that it makes it almost impossible to change data that is already stored on a closed block, and this makes blockchain in general extremely safe, secure, and transparent. 

Some of the most popular hashing functions or algorithms include SHA-256, SHA-3, RIPEMD-160, BLAKE2 and Scrypt. SHA-256 remains one of the most widely used thanks to the high security it provides. 

* The information in this article and the links provided are for general information purposes only and should not constitute any financial or investment advice. We advise you to do your own research or consult a professional before making financial decisions. Please acknowledge that we are not responsible for any loss caused by any information present on this website.
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