Posted on: 09. March 2018

Cryptographic Hash Function

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The Cryptographic Hash Function – The Heart of the Cryptocurrency

The name ‘cryptocurrency' is a clear indication of the connection between bitcoin and co. on the one hand, and cryptography on the other. This relationship manifests itself in the cryptographic hash function – a subclass of hash functions that use cryptography.

A hash function is a one-way function that maps strings of any length to a string of a defined length. This image is encrypted when using cryptography.

The best-known application of a cryptographic hash function is the secure hash algorithm SHA-2, which was developed in 2000 as the successor of the SHA-1 by the US intelligence agency, NSA.

This algorithm created an encrypted hash from any data. Bitcoin is based on the derived algorithm SHA-256.

What does that mean in the context of cryptocurrencies?

Cryptocurrencies are currently the most popular application of the hash function but it is not limited to this by any means. The hash function should be regarded as a standard network application used, among other things, to test the integrity of files.

Bitcoin takes advantage of this aspect by booking and verifying transactions based on this feature. SHA-256 is also used to create bitcoin addresses. Each bitcoin transaction must first be verified and then entered as a block in the decentralized bitcoin accounting, the blockchain.

These are created by the SHA blocks that summarize all relevant information of a transaction. These blocks are read during the verification of a transaction. People who provide processing power for this process are rewarded with coins.

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