In cryptocurrency Hashing refers to the transformation of any kind and size of information in the form of a set of characters, the so-called hash, which has a fixed length. This conversion occurs using a mathematical formula, also known as a hash function. This technology is fundamental to cryptocurrency because it allows blockchains and other distributed systems to achieve high levels of data integrity and security.
Hashing algorithms in cryptocurrencies are designed in such a way that their function is one-way, meaning that data cannot be reversed without investing a large amount of time and resources to perform calculations. In other words, it is fairly easy to generate an output from input data, but relatively difficult to perform the process in the reverse direction (generate input data from output data). The harder it is to find the input value, the more secure the hashing algorithm is considered to be.
How does a hash function work?
Different types of hash functions produce different output values, but the possible output size for each hashing algorithm is always constant. For example, the SHA-256 algorithm can produce output in 256-bit format only, while SHA-1 always generates a 160-bit digest.
To illustrate this, let's run the words "Binance" and "binance" through the SHA-256 hashing algorithm (the one used in bitcoin):
SHA-256
Input:
Binance
f1624fcc63b615ac0e95daf9ab78434ec2e8ffe402144dc631b055f711225191
binance
59bba357145ca539dcd1ac957abc1ec5833319ddcae7f5e8b5da0c36624784b2
Note that a slight change (case of the first letter) resulted in a completely different hash value. As we have used SHA-256 in this example, the output will always have a fixed size of 256 bits (or 64 characters), regardless of the input value. Furthermore, it does not matter how many times we pass the two words through the algorithm, the two outputs will not change because they are constant.
Why is hashing technology needed?
Cryptographic hash functions are used extensively in information security applications for message authentication and digital fingerprinting. When it comes to Bitcoin, cryptographic hash functions are an integral part of the mining process and also play a major role in generating new keys and addresses.
Hashing is irreplaceable when dealing with huge amounts of information. For example, you can run a large file or set of data through a hash function and then use the output to quickly check the accuracy and integrity of the data. This is possible because of the deterministic nature of hash functions: an input will always result in a simplified compressed output (hash). This method eliminates the need to store and remember large amounts of data.
In fact, virtually all cryptocurrency protocols rely on hashing to bind and compress groups of transactions into blocks, as well as to create cryptographic connectivity and efficiently build a chain of blocks.
Security of a hash function
In order to crack a hash will require countless attempts of brute force matching numbers, conventionally using the scientific method, it will be necessary to reverse the hash function until the corresponding output will not be obtained. Nevertheless, there is a possibility that different inputs will produce the same output, in which case a collision arises (confrontation of interests, unreliability, lack of confidence in authenticity).
From a technical point of view, a cryptographic hash function must meet three properties to be considered secure. We can describe them as: collision-resistance, and first- and second-problem retrieval-resistance.
Before we start parsing each property, let us summarize their logic in three short sentences.
- Collision resistance: it is impossible to find two different inputs that produce a hash similar to the output.
- Resistance to finding the first sample: there is no way or algorithm to reverse the hash function (finding the input by a given output).
- Stability to search for second sample: it is impossible to find any second input that would overlap with the first one.
Resistance to collision
As mentioned earlier, collision occurs when different inputs produce the same hash. Thus, a hash function is considered collision-resistant until someone detects a collision. Note that collisions will always exist for any of the hash functions, due to the infinite number of input data and the limited number of outputs.
Thus, a hash function is collision-resistant when the probability of detection is so small that it would require millions of years of computation. For this reason, while there are no collision-free hash functions, some are so strong that they can be considered robust (e.g., SHA-256).
Resistance to first-arrival lookups
This property is closely related to the concept of one-way functions. A hash function is considered robust to finding the first sample, as long as there is a very low probability that someone can find an input with which to generate a particular output.
Note that this property is different from the previous one, since an attacker would need to guess the input based on a particular output. This type of collision occurs when someone finds two different inputs that produce the same code in the output, without giving any importance to the input data that was used to do so.
The first-sample lookup resistance property is valuable for data protection because a simple hash of a message can prove its authenticity without the need to divulge additional information. In practice, many service providers and web applications store and use hashes generated from passwords instead of using them in text format.
Resistance to finding the second sample
To simplify your understanding, we can say that this type of resilience is somewhere in between the other two properties. The attack of finding a second sample is to find a particular input with which to generate output that was originally formed through other inputs that were known in advance.
I agree it sounds confusing, but in essence, this finding a second sample attack involves collision detection, but instead of finding two random inputs that generate the same hash, the attack aims to find the input data with which to recreate the hash that was originally generated by another input.
Hashing Technology in Mining
There are many steps in mining that are done with hash functions, they include checking the balance, linking transaction inputs and outputs, and hashing all the transactions in the block. But one of the main reasons the bitcoin blockchain is secure is that miners must perform as many hash-related operations as possible in order to eventually find the right solution for the next block.
A miner must try to pick up several different inputs when creating a hash for their candidate block. It will only be possible to verify the block if the hash output is correctly generated starting with a certain number of zeros. The number of zeros determines the complexity of the mining and it varies depending on the hash rate of the network.
In this case, the hash rate is the amount of power of your computer that you invest in mining bitcoins. If the hash rate starts to increase, the bitcoin protocol will automatically adjust the mining complexity so that the average time required to mine a block is no more than 10 minutes. If several miners decide to stop mining, resulting in a significant decrease in hash rate, the mining complexity will be adjusted to temporarily ease the computational work (until the average block formation time returns to 10 minutes).
Note that miners do not need to look for collisions, due to some number of hashes they can generate as a valid output (starting with a certain number of zeros). Thus, there are several possible solutions for a given block and miners need to find only one of them, according to a threshold that is determined by the difficulty of mining.
Since bitcoin mining is such a costly task, there is no reason for miners to cheat the system, as this would result in significant financial losses. Accordingly, the more miners join the blockchain, the bigger and stronger it becomes.
Conclusion
Hash technology is definitely one of the main tools when dealing with huge amounts of data in IT and cryptocurrency. Combined with cryptography, hashing algorithms are hard to overestimate, they are very versatile and offer security and multiple authentication methods. Thus, cryptographic hash functions are vital for almost all cryptocurrency networks, so understanding their properties and working mechanisms is definitely useful for anyone interested in cryptocurrency and blockchain technology.
Thank you for your attention and we hope this article was useful for you!
Fortune favor you on your way and see you soon!
Always yours C.J.
