What is Bitcoin’s The Hash Function? How it Works?

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What is a Hash Function?

A hash function is a specific function that can convert any size any kind information to the small fixed-sized values. The final product is called a hash value, hash digest, or hash codes. Hash codes consist of the arbitrary formation of numbers and letters. Those hash functions offer various advantages rather than using the original data itself. There are some types and versions of hash functions, and they are usually used to implement digital signatures.

What is a Cryptographic Hash Function?

Cryptographic hash functions are similar to the usual hash function. These are the hash function used for cryptographic security purposes. As a one-way function, the hash function offers a great deal of security. If you have the hash function of the transaction, it is infeasible to convert to the original form. At the same time, small changes in the original file will cause an abrupt change in the hash key. This concept is called the avalanche effect, which means tiny changes cause inherent change. So, you will understand its originality simply comparing its hash keys. The small size of hash functions allows computers to search in the whole database in just a few seconds. It would not be the case if those stayed as original files. Those advantages make usage of hash functions inescapable.

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We will examine the hash function in the case of Bitcoin. Unlike other cryptocurrencies, Bitcoin only consists of ledger notes or transaction information. In the blockchain, those transactions are grouped and put into the blocks. There are many hashing algorithms. The most used algorithm in the blockchain is SHA2-256(Secure Hashing Algorithm version 2 with 265bit). Here we will investigate the practice of the hash function in transactions and blocks.

Hash values in transactions

A transaction has two parts: input and output. The input section consists of some elements. Before sending a bitcoin to other addresses, the blockchain system has to be sure that you have the specified amount of bitcoins. To be sure, the system adds the hash value of the referenced transaction. The referenced transaction is the last transaction you had. Why? If you got a reward of 6.25 bitcoins from the mining, then you will receive it from the system. If you want to send 6 BTC to Coinsfera and to keep 0.25 BTC for yourself, then you have to send 6 BTC to the public key of the Coinsfera and 0.25 BTC to your address. Using that method computer does not need to go down in your ledger just referencing the last transaction they find all they want. So, that’s why the blockchain adds the hash value of the previous transaction to the current transaction.

Hash values in blockchain

The practice of hash values in the blockchain is complicated than in transactions. Blockchain comprises of blocks as its units. Each block consists of numerous transactions and ledgers. You can check out our blockchain blog to learn more. How those transactions situated in blocks? Programming uses the Merkle tree approach to put those transactions into the blocks. For the sake of simplicity, let’s take three transactions. How will you put them into a hash? Firstly, we should find an individual hash of those transactions. Next, obtain the hash value of the first two ledgers. In the scenario, transactions have to be even-numbered, but here it is odd-numbered. In this case, we should write the hash of the last transaction again. So, we estimate the hash value of the 3rd transaction two times. We get the hash value 12 and hash value 33. In the end, we add those again and get the last hash value of the block. Nodes do this process for each block. Each block will have the hash of the previous block, and the blockchain will continue in this way.

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With all of the benefits, hash values are appropriate for blockchain. It makes searches faster and transactions more secure also require a small size. It is better than using whole files instead. So as long as hash values live, blockchain will exist, and as long as blockchain lives, hash values will exist.