What Is Hashing?

A hashing algorithm on a blockchain takes an infinite number of bits, puts them through calculations, then outputs a fixed number of bits. No matter the length of the input data, the output is always rectified at a fixed length.

Why Is Hashing Important?

Hashing helps to prevent major issues in the cryptocurrency industry, including:

  • Double-Spending — Double-spending on a blockchain is the risk of when users can spend cryptocurrency twice or more.
  • Fraudulent Transactions — These are transactions that are untrue or used deceitfully.

Hashing also allows passwords to be safely and securely stored on the blockchain. Since hashing creates a unique non-duplicable number from the algorithm, hashing can be used as a way to verify a file’s authenticity.

Hashing and Bitcoin

Hashing plays an important role in the Bitcoin system. The specific hash algorithm on Bitcoin is the Secure Hashing Algorithm 256 (SHA-256). This algorithm is a one-way cryptographic function, meaning the original data cannot be retrieved through decryption.

Key Takeaway

Hashing is an algorithm which inputs data into a fixed-size string, thus encrypting and securing it.

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