What Is Cryptographic Hashing?

Every blockchain using the Proof-of-Work (PoW) consensus mechanism needs a method to meet encryption demands for computing its blocks. This is achieved by a process called hashing. Hashing is an integral part of blockchain management. 

To find out more about this, read on.   

Hashing: A deeper insight

In blockchain technology, a hash function produces an output called a hash. It is a mathematical function that converts an input of variable length to an encrypted output of a fixed length. The output may also be known as hash code, value or digest. 

Hash functions are a great way to secure a network as they are ‘one way. No one can reverse engineer your input from the output hash value. If you use a hash function on the same data, the resulting hash will be the same. This way, you can confirm if the input data is unaltered.

What Is Cryptographic Hashing?

Cryptographic hashing is a lot like normal hashing but with added security measures. These properties help make the contents of any information or message very difficult to detect. They have the following features:

• A hash has its output. Each hashes will have a different output. This makes them collision-free. 
• Cryptographic hashes protect an input. No one will be able to detect the input value of a hash by looking at its output. 
• Hash functions convert the input to the output quickly and efficiently. This way, a network can process many transactions in a minimum time.  

Hashing In Cryptocurrencies

Hashing has a huge role to play in the crypto world. As you know, a blockchain is a global decentralised ledger which contains blocks of individual transaction data. This transaction data is present in the form of hashes, thus making it difficult to understand the original data. This is important as blockchains are a public ledger, and anyone can view the transactions on the network. 

This same hashing process is applicable when you mine crypto. A hashing process starts from data present in a block header. It is like solving a complex mathematical problem. The block header contains a time stamp, version number, the hash of the previous block, Merkle root hash, nonce and the target hash. 

When you mine, you focus on the nonce, a string of numbers. These numbers are affixed to the previous block contents. You can finish a hashing process by changing a single value of this nonce. Every time a nonce changes, a new hash generates.

Each new hash has its own set of numbers. You cannot predict the value of a new hash, and thus you have to repeatedly add a new nonce to the data until you meet the hash requirement. 

After a hash generates, if it’s less than or equal to the target hash, that is accepted as a solution. Thus, the block mining is complete, and you get its mining rewards. It is then added to the blockchain. 

This may sound like a simple process but is quite critical. Each hash value generates randomly. Thus, finding the correct hash to match the target hash requires a lot of trial and error. Miners, mining pools and corporate mining companies use high-powered ASIC computers which process trillions of hashes per second to match the target hash. 

This question may pop up in your mind why do Proof-of-Work blockchains use mining? The simple answer is that this process helps the miners act as auditors for validating transactions on the network. 

You can consider the block rewards as compensation for their hard work. This way, blockchains maintain their decentralised nature and remove the need for a third party to validate the authenticity of their transactions. Satoshi Nakamoto, the founder of Bitcoin, created this genius concept. 

Hashing And Security On Blockchains

The protocol of a cryptocurrency blockchain sets a target value for the requirement hash. This value is automatically set, and the algorithm changes it periodically. If the target value is lower, the miners must repeat the hash function multiple times to get an acceptable result. Blockchain experts call this increase in the repetition rate mining difficulty.  

Blockchains use hashes to control the mining difficulty on the network. If the miners find it easy to mine a block, the network algorithm will raise the mining difficulty. And if the miners find it difficult to mine a block, the protocol will lower the mining difficulty. This helps to maintain a set time, after which a miner can add a new block to the blockchain. 

As a miner, you may get lucky and match a target hash on your first try. However, with time, a blockchain's mining difficulty keeps increasing to cope with increasing competition on its network.    

This process has numerous benefits in regulating activities on a blockchain. They are:

• Steady block generation

Let’s take Bitcoin as an example for you to understand clearly. Bitcoin has a set block time of 10 minutes. A user can add each new block to the network after this time. Now, the computing power of each miner tends to vary. To cope with this situation, Bitcoin adjusts its target hash by raising or lowering it. Raising a target hash reduces mining difficulty, and lowering it increases its mining difficulty.  

• Security

A blockchain's mining difficulty helps protect it from a 51% attack. If the difficulty is high, it will take miners more time to find the correct hash to validate a block. This will make it difficult for malicious groups to gain 51% control of a network as it will be very difficult and expensive. 

Hashing is what keeps the whole Proof-of-Work consensus mechanism running. It provides the encryption and anonymity that a blockchain promises to provide. With it, the network will have security, and it will be easy to know which user owns what amount of cryptocurrency at a particular time.