Hash functions – Everything you need to know about this critical technology

In cryptography and blockchain, hashing is more than just a technical term – it is the foundation that holds the systems together. But what is it really?

What does a hash function do?

A hash function is a mathematical algorithm that transforms data of arbitrary size into an output of fixed length. Think of it as a tool that always produces the same size “fingerprint” regardless of how much information you input.

There are two main types of hash functions: conventional and cryptographic. The latter are what drive blockchains and security systems forward. A central feature of these functions is that they are deterministic – the same input always generates the same output. No variation, no surprise.

But here's the really interesting part: cryptographic hash functions are designed as one-way functions. This means that it is easy to create a hash from input data, but almost impossible to reverse it – to recreate the original from just the hash. You would need millions of years of computing power just to attempt it.

How does it work in practice?

Take SHA-256, which is used in Bitcoin. This hash function always produces a 256-bit output. If you run the word “Bitcoin” through it, you get a result. Change just one letter to “bitcoin” and the entire result changes dramatically – even though the input is almost identical.

Here is the example:

• Input: “Bitcoin” → Output: c6047f944b970d40c98bdf66dedfb86191c0f867b4d6fdbb76efad1e107efc41
• Input: “bitcoin” → Output: 6b88c08733550c7e2e7e9f39b8d5b3e2c1a8d5f6g7h8i9j0k1l2m3n4o5p6q7

SHA-256 is part of the SHA-2 group. There is also SHA-1 and other variants, but currently only SHA-2 and SHA-3 are considered secure enough for modern applications.

Why is hashing so important?

Hash functions solve a fundamental problem: how do you verify that a large amount of data has not been tampered with without having to store everything? Answer: you use the hash.

A small hash can represent a gigabyte of data. If someone changes even a single bit of the original, the hash will become completely different. This makes it impossible to cheat without being exposed.

In Bitcoin, hashing is used everywhere:

• To link transactions together
• To create Merkle trees within blocks
• To link blocks in a chain
• To ensure that everything remains unchanged

The Three Security Pillars

A robust cryptographic hash function must have three properties:

Collision resistance: It should be practically impossible to find two different inputs that produce the same hash. Theoretically, collisions always exist – there are infinitely many possibilities for inputs but limited outputs. However, a secure hash function makes it so extremely difficult that it would take longer than the age of the universe.

Pre-image resistance: Given a hash, you cannot work backwards to find the original. This is what makes one-way functions valuable for passwords and authentication.

Second pre-image resistance: You cannot find a completely new message that produces the same hash as another known message. It lies somewhere between the other two properties in difficulty.

Mining: Where hashing meets economy

Bitcoin mining is where hashing truly shows its power. Miners must find a hash value for their candidate block that starts with a certain number of zeros. This is referred to as meeting the difficulty.

There is no shortcut – you just have to try input after input until you succeed. If the total computing power of the network (hashrate) increases, the difficulty adjusts automatically so that block generation remains approximately every ten minutes.

Interestingly, miners do not need to find unique collisions. There are many valid solutions for a block – any that meet the difficulty criteria works. First to the finish line wins.

This process makes Bitcoin robust. The more computing power dedicated to the network, the more secure it becomes. And since mining is expensive economically, it is a bad idea to try to cheat.

Concluding Thoughts

Hashing is not just a technical curiosity – it is the backbone of blockchain technology. Together with cryptography, hash functions enable both security and verification on a scale that would otherwise be impossible. Whether you are interested in Bitcoin, Ethereum, or any other blockchain protocol, it is almost certain that powerful hash functions are working behind the scenes to keep the system together.