September 29, 2020

Bitcoin Hash Functions: Explained

Bitcoin Hash Functions: Explained

Everyone who is keen on cryptocurrencies heard the phrase “cryptographic hash function”. This topic is very difficult for beginners. What does the hash function mean and how is it associated with cryptocurrency? It is much simpler than you might first think.

The hash function is a significant characteristic of every cryptocurrency. It is the base of cryptocurrencies and hashes maintain the security of cryptocurrencies. Also, the hash function affects the speed of mining and the difficulty of this process.

What is the hash function in general?

Bitcoin Hash Functions: Explained

The hash function is the mathematical process that takes the data, makes some operations with it and returns the data that has a fixed size. The hashing algorithm decides how long it is. The size of the hash string is different and depends on certain cryptocurrency.

The hash function is most often applied when saving passwords. Let’s consider how it works.

When you create your account on some internet services, your password is processed and stored in a special place. It isn’t a secret. But how is it protected? You can say “thank you” to the people who created the hashing function to store passwords or other secret information safely.

Anyone can get the password based on the hash function, and this is a great method to store important information. When a user types in the password during login into his account, the password is automatically converted to the hash and the result is compared with the saved password in the account.

Every hash function has two arguments. First is the input data. This is information that is processed. The second argument is the output data. This is a result of calculations.

What is the hash function in Bitcoin?

The hash function is the main method of generating blocks when the user mines cryptocurrency. It is necessary for integrating the block into the blockchain network. Also, the hash function is used for creating private and public keys.

As we know from the information above, the two basic categories of the hash function are the input data and output data. The first is the transactions that are not accepted. Even if a small part of input data is changed, the result is totally different. To accept the hash, it has to meet the requirements of the rules. This rule is a certain number of zeros at the beginning of the result. The difficulty depends on the number of these numbers that are required. For example, getting the hash with one zero at the beginning is easy. But what about 18 zeros? The difficulty is regulated to adjust the task of generating one Bitcoin to every 10 minutes. Why? The reason is very clear and understandable. It allows Bitcoin to be mined significantly slower and controls the price of this cryptocurrency.

Hash functions are different. We can say something similar about the rules. Depending on the hash function that is used, the size of the fixed bit varies from 64-bit to 256-bit. This result is named “hash”. This is a product of a hash function.

Every hash function has unique properties:

  1. The result of calculations made by the hash function is a unique result (hash).
  2. This function has only one direction. Due to this, you are not able to get the input data after hashing. In simple words, you can’t get the real finger if you have a fingerprint. That’s why you can consider hash as a digital fingerprint of the information that is processed by the hash function.

The hashing function is based on mathematical laws.

What is the difficulty of Bitcoin mining?

Bitcoin Hash Functions: Explained

This topic has a very tight connection with hash functions because the hashes can have different generation difficulty according to certain rules. Bitcoin mining difficulty is a changing value. It depends on the time that users need in total to generate one block.

What is a block? Actually, this is a file with information about transactions. The size of this file can be different, but it is always limited. The main goal is to generate one block every 10 minutes on average.

If the number of people who want to send Bitcoins is too high, blocks will be generated very fast. It is a factor in the commission’s size. The person who pays more can generate a block faster.

The size of the block becomes larger and larger. It is necessary to increase the speed of the transactions and delete any queues.

The following question might arise: What is the connection between Bitcoin blocks and hash functions? This connection is very clear. Every block is added after checking the hashes. The difficulty changes depending on the time needed to generate a previous block. Also, changing of difficulty is carried out after every 2016 blocks are added to the blockchain. It is necessary to control the speed of mining. Why does blockchain need to regulate this? Let’s look at the basic economics laws.

We know that the uncontrolled emission of money can stimulate inflation. If money is emitted in large amounts, the worth becomes lower. If everyone can get the money, they stop being a payment instrument. Due to this law, cryptocurrency is also controlled.

Miner tries to find the hash that starts from a certain number of zeros. This is not such an easy task – the chances of a successful operation is very low. Due to this, there is a big number of attempts that require very powerful equipment. The more powerful your device is, the more number of hashes it can check.

Bitcoin Hash Functions: Explained

For creating the header of the block that starts from a certain number of zeros, the user gets the reward that is equal to 12,5 BTC. The reward becomes smaller and smaller with time.

Only one miner can get the reward. This is a person who managed to generate a correct hash first among other users. For this reason, there is a huge part of luck in mining. For example, there are three miners. The first one could generate a correct hash and got the block. The second and third miners didn’t get the money in this situation. These blocks are named orphan blocks. They aren’t written in the blockchain. In some other blockchain networks (such as Ethereum), the user gets a reward for every mined block, even orphaned. Thus, Bitcoin is worse than Ethereum in this case. Nobody can guarantee you that your investments will be returned because of this moment. However, everything is not as bad as it can sound. You can earn money if you invest the amount of money that allows you to buy equipment that is necessary for maintaining the hashrate sufficient to cover these risks.

What is the hash of Bitcoin?

Every cryptocurrency uses its own hash algorithm. On the base of Bitcoin blockchain, SHA-256 functions are used. A proof of work algorithm is one of the kinds of this hashing algorithm.

To add only one block to the blockchain, the head of this block needs to be less or equal to the 256-bit sequence.

Hashrate is the word that describes the speed of brute force hashes. The higher the hashrate is, the more powerful device is. If the total hashrate increases, the network needs less time to find a correct hash. Due to this, the difficulty changes to make a block being mined for 10 minutes.

The hashrate is necessary to understand what equipment the pool needs to use. If hashrate is higher, you need to have a more powerful device to increase your chances of finding a correct hash before other members or pools.

Hash is a short code that represents a huge amount of data, but some of this data is lost forever. This is a great feature that can protect your data. Restoring it on the base of hash is technically impossible. However, you can check the data via generating the hash using a similar hash function. If the result is similar, this data matches the hash.

This process is carried out continuously. This is the accepting mechanism that checks every transaction. That’s why there is no hacker that can hack the blockchain and cause a false transaction. It is also a protection from mistakes in mining.

Conclusion

As we see, the hash is not such a hard topic. This is a result of a hash function that returns the hexadecimal number after processing some input data. To create a block, miners need to generate the correct hash for the block. The difficulty can be different. The more zeros a hash has to have, the more difficult mining is. Difficulty depends on the hashrate which is the speed of calculations using the hash functions.