What is the SHA-256 Algorithm In Bitcoin? | Understanding the Basics
With Bitcoin reaching mainstream adoption, its core security mechanism is being analyzed frequently. Proof-of-work is often described as a “cryptographic puzzle,” but what exactly is that challenge? There is a complex set of algorithms associated with it.
Cryptography, the underlying technology of blockchain and cryptocurrencies, was developed long before it became popular. It is the study of encrypting and decrypting information. Cryptocurrencies such as Bitcoin use cryptographic hash functions like SHA-256 to validate transactions on the network.
In this article, we will look at how SHA-256 works and why it was implemented in the Bitcoin network.
What is SHA-256 Cryptographic Hash Algorithm?
SHA-256, or Secure Hash Technique 256, is a hashing algorithm that converts variable length input into a 256-bit fixed-size hash (32 bytes). These cryptographic hashes work in the same way as data fingerprints do. For any text of any length, there is a unique hash generated by this algorithm.
The National Security Agency (NSA) of the United States designed SHA-256 in 2001. SHA-256 is a part of the NSA-designed SHA-2 family of cryptographic hash algorithms.
Cryptographic hash functions are mathematical operations performed on digital data; the integrity of the data can be determined by comparing the calculated “hash” (the output of the algorithm’s execution) to a known and anticipated hash value. Any piece of data may be used to make a one-way hash, but the hash cannot be used to generate data. This algorithm is commonly used in website SSL certificates (encrypted communication between web browsers and web servers) and the DKIM message signing standard for email clients.
SHA-256 is a popular hashing technique that was initially employed in Bitcoin encryption when the network launched in 2009. SHA-256 has now been used by a variety of blockchain projects, including various currencies formed from forks of the original Bitcoin source code.
As of this writing, the SHA-256 mining algorithm secures nearly $45 billion in digital currencies across the top three SHA-256 blockchain projects by market capitalization: Bitcoin (BTC), Bitcoin Cash (BCH), and Bitcoin Satoshi’s Vision (BSV).
How SHA-256 works in Bitcoin?
The Bitcoin blockchain is typically defined as a cryptographically secure and hence immutable database. Cryptographic hashing is the fundamental technique that enables this immutability and security. Hashing algorithms work efficiently, allowing Bitcoin to be the decentralized platform that it is today. Let’s see how
Bitcoin miners collect a number of Bitcoin transactions into a block, then execute a cryptographic operation called hashing. Hashing is done many times until someone discovers a highly unique hash value.
The block has now been mined and is now part of the Bitcoin blockchain. The hashing work accomplishes nothing beneficial in and of itself, but because finding a valid block is so tough, it ensures that no single person has the capacity to take over the Bitcoin system.
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