Hashing (the hashing process) is one of the most important parts that keeps the Bitcoin network secure. But how does hashing work?
Cryptocurrencies are trustless systems. Users do not need to rely on third parties, such as banks or governments. So how to eliminate the involvement of intermediaries? The key lies in the hash function and smart cryptography.
What is a hash function?
A hash function is a technique by which all data is converted into a long series of letters and numbers to hide the original data. The hash function is special in that it will always produce the same sequence of characters for the same set of data. But if you make even a small change in the original source, that sequence of characters will change completely. Hash functions can be used to determine who owns a piece of data without revealing what that data is.
How does hash function work?
The hashing process turns a piece of data into binary code, essentially a series of 0s and 1s. Once completed, it breaks the numbers into parts and secretly mixes them, also known as a calculation function. The end result is usually a 64-digit string of numbers and letters.
This string of 64 numbers is almost impossible to hack because the conversion is done by an algorithm, whose formula is unknown. However, some specialized software can read the hash and check.
What is a hash function used for?
Generate private and public keys: To send and receive cryptocurrency or make transactions on the blockchain, you need a key pair. The private key is connected to the public key via a hash function to keep your information safe. You can send your public key to anyone or on a public profile. But no one can find out the private key thanks to the hash function.
Bitcoin Mining: Bitcoin maintains a level playing field for participants who earn themselves the right to create the next block. To gain mining rights, each miner collects a set of transactions, including a reference from the previous block to include in the hash. The hash function must give results starting with a certain number depending on the difficulty of the network at that time. The more numbers, the harder it is. Essentially, hash functions are used to solve the puzzle of the blockchain.
Linking blocks in a blockchain: If blocks in a blockchain are not linked, it is easy to insert a fake block. Bitcoin avoids this by linking each new block to the previous block, using a hash pointer. The hash pointer is the result produced from hashing the previous block in the chain. Anyone can check whether the transactions in the block are consecutive to the previous transaction. This also means that the history of each coin can be traced back to the time they were mined.
