Explained: What is Hashing in Blockchain?

Hashing (or hashing) is a common term when discussing blockchain technology . Hashing refers to converting and creating from input data of any size into a string of fixed size, performed by a special algorithm. Specifically, the Bitcoin hash algorithm is SHA-256 or 256-bit Secure Hashing Algorithm. This algorithm is a one-way cryptographic function, meaning that the original data cannot be recovered by decryption.

The implementation of a cryptographic hash function is intended to protect against fraudulent transactions, double spending on the blockchain, and cryptographic storage. But, what is a Bitcoin hash, and how does it work? In short, this is a unique sequence of numbers that is not duplicated according to the algorithm. From there, it is often used to verify the authenticity of the file. To put it into context, when there is a change in the hash file, the hash sequence automatically changes as well. And each subsequent hash is bound to the previous hash, ensuring the consistency of the entire block.

How Does Hashing Work in Blockchain?

So what is the hashing algorithm in blockchain , and how does it work? Briefly, the hashing algorithm takes an infinite number of bits, performs the math, and outputs a fixed number of bits. Regardless of the input data size, the output is always adjusted. As a result, the initial data is called input , and the final transformation is called hash . Today, many hashing algorithms differ only in how information is processed.

To fully understand what hashing is, it is necessary to first understand data structure. A data structure is a special way to store data that consists of two key elements: pointers and linked lists . Pointers are variables that point to other variables, so they act as indexes to the correct address. Besides, it provides the address of the next block in the chain. Linked list , on the other hand, creates a set of network nodes linked together with the help of pointers.

How to Decode Hash?

To decode the hash, it starts from solving the complex mathematical operation containing the data on the block header. But before miners get started, they need to go through a trial-and-error process to decide which string to use as a nonce. Once a nonce is determined, miners will focus on the nonce (a string of numbers) related to the hash content of the previous block. For a hash to be considered successful, the new hash needs to be less than or equal to the target hash. And in return, miners will receive rewards for adding blocks to the blockchain.

The Relationship of Proof of Work in Hashing

The Proof of Work (PoW) algorithm correlates with blockchain hashes because it is useful for validating transactions and creating new blocks in the chain.

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Illustration of Proof of Work in Bitcoin. Photo: IEEE Spectrum

How Does PoW Work?

Decentralization is an important attribute of blockchain, but it is inherently vulnerable. How do other users know the blockchain is correct if a participant wants to download a copy of the blockchain? Suppose there are thousands of computers on the network; what stops them from plotting to trick new users with data they generate?

That’s when the PoW algorithm was born. It allows participants in the blockchain network to know whether the information is truly free or otherwise.

Transaction history is all over the web, where you need to know who paid and who received it. Previously, it was impossible to achieve complete uniformity in a decentralized network without a third party controlling it. The hash function made it possible because it provides a unique digital fingerprint of a piece of data.

PoW in the Crypto World

The idea of ​​PoW is designed to protect against DDoS attacks that freeze the system and refuse to fulfill user requests. PoW also prevents spam and effectively protects the entire network. Although it is not the ideal solution to the problem, this idea is still relatively effective.

In the crypto world, PoW protects cryptocurrencies because it supports decentralized networks. A simple example: one person creates an e-wallet that is not synchronized with the entire network. As soon as he connects, the wallet changes its status to ‘synced’ as it begins accessing the blockchain.

Why Is Cyber ​​Fraud Not Profitable For Miners?

Hash is very useful to help regulate the system better, but it also comes at a price. When miners mine a new block for the blockchain, they must provide two hashes to the network:

  1. One hash for all transactions in the block.
  2. A hash proves that the miner spent a significant amount of energy resources to create the block.

Even if the system is stable, the reward for miners is very small. Considering the amount of resources needed to decode the hash, this job is not very profitable. But to do that, miners need to organize a lottery-like system, where there can only be one winner. And there is no guarantee of finding the hash.

Besides, if the GPU and CPU are weak, the processing time will be endless, only computers with expensive equipment can handle the processing power. Even so, these computers consume large amounts of electricity, making the entire process unprofitable for miners who find a valid hash for an invalid block of transactions. Ultimately, it makes no sense to verify a “wrong” block, even if the entire transaction is valid and hashed. All other computers on the network will reject the block as invalid, meaning the miner will not receive the reward.

Proof of Transaction

When sending cryptocurrency, users must confirm the action on their wallet, which will trigger a transaction on the blockchain. The transactions then sit in the pending transaction pool, where they wait until they are picked up by miners.

Transactions of this type can accumulate in one large pool or separate small pools. Miners select transactions from the mining pool and include them in the new block. This block includes transactions awaiting confirmation with metadata. Finally, each miner trains a separate block. And those same transactions can join the blocks of different miners.

Miners must ensure that each transaction meets execution requirements. In case the sender has enough balance in the account, the transaction is valid and can be added to the block. For faster processing, senders can increase mining fees. Thus, miners will receive higher value transactions, choosing the transactions with the largest profits, reducing the processing process.

Each transaction has a hash stored in a tree structure. These hashes are also hashes according to the Merkel root model . This technology contains information about all transactions.

What is a Cryptographic Hash Function?

Cryptographic hash functions have many unique properties that make them very useful for use in cryptographic spheres.

  1. The result of the hash function is always the same. This property is called determinism . No matter how many times you enter the same message, the output is always the same after applying the hash function. However, just a small change in the input data (‘Article’ instead of ‘article’) will change the result immediately.
  2. It has a fast calculation function because slow speed will make the system inefficient.
  3. The Preimage resistance feature in the hash function makes it computationally impossible to determine the input from the hash data. From there, miners can only compare results until they find a matching pair.

Hash Rate Unit

Hash rate is the total computing power of the mining equipment involved in mining cryptocurrency. Units of measurement include:

  • Hash/second (H/s)
  • Kilohash/second (KH/s)
  • Megahash/second (MH/s)
  • Gigahash/second (GH/s)
  • Terahash/second (TH/s)
  • Petahash/second (PH/s)
  • Exahash/second (EH/s)
Total Hash Rate Total Hash Rate


As mining becomes increasingly complex, it is almost impossible to see the unit ‘H/s’ in modern blockchain networks. Today, the increased power needed to solve problems falls into the 10 MH/s range.

For example, a processor with a power of 10 MH/s means it can generate 10 million different arithmetic combinations per second to find a hash that will match all the parameters set by the network.

However, there are many different factors that determine hash rate. Even the choice of mining algorithm also affects the parameters. It’s also important to know how other devices react to different algorithms. While some provide maximum capacity for networks with SHA algorithms (Bitcoin, Peercoin, etc.), results may be worse if the same network uses Script algorithms.

How Secure Is Hash Data?

Each block contains a hash from the previous block (parent block) except the Genesis block . Visualize a chain of blocks with hashes of parent blocks. If the information of one of these blocks changes, it will affect the entire other blockchain. However, as the network grows, changing the hash across all blocks becomes impossible. From there, the hashing process becomes necessary for the blockchain, ensuring the uniqueness and originality of each element in the system.

Immutable and trustworthy data is one of the core properties of blockchain, which makes it valuable and gives it huge potential. The information is always authentic, thus determining the integrity of the blockchain.

How to Measure the Hash Rate of the Bitcoin Network?

The Bitcoin hash rate represents the total computing power of all network nodes in the world mining Bitcoin . However, it is difficult to determine because the miners participating in the network have little information, and they only communicate with the network after finding a block.

However, the hash rate is estimated daily by comparing the number of blocks found within 24 hours with the number 144, which is the expected rate of finding a block. According to the algorithm, the mining speed will remain the same (600 seconds). That way, the formula for calculating Bitcoin hash power is:

Hash Capacity = ((Number of blocks found in 24 hours/expected number of blocks) x Jobs)/600

The higher the Bitcoin hash rate, the more difficult the mining parameter. Because it always adjusts to comply with the entire hash job. Adjusting the difficulty is necessary for security. So it helps protocols avoid monopoly. Maintaining the speed of cryptocurrency mining is essential to avoid inflation. Otherwise, miners will generate more Bitcoin faster, and the cryptocurrency will lose value.

How Does Hash Affect Bitcoin Mining?

Mining remains decentralized because two miners simply cannot hash the same block. Miners receive transactions from the network in different orders. For that reason, and because each individual has different preferences when it comes to commissions, each miner processes the block a little differently.

While entire blocks can be verified for accuracy, only one block is entered into the blockchain at a time. All miners will have to keep hashing until they find a number that produces a result that the network recognizes as valid and adds that block to the blockchain.


Network Difficulty Network Difficulty


Besides, the network must ensure the creation of new blocks every 10 minutes to maintain Bitcoin’s financial policy. The network does that by adjusting mining difficulty every two weeks. Thus, if blocks are verified too quickly due to an increase in the number of new miners, the network will increase complexity to reduce inflation.

Because blockchain hashes are completely random, even miners with the most powerful computers do not always win. This idea is similar to the lottery. Users with the largest number of tickets have a greater chance of winning, but there is no guarantee of winning every time.

Generally, miners create a block of verified transactions and then run Proof of Work on that block, hoping to find a hash according to the network’s rules before other miners. If the process is successful, the block enters the blockchain, and the miner receives a reward. Hardware configuration is also important, this factor needs to be considered when buying mining equipment.

Does Hash Only Apply to Bitcoin?

Hashing is a central and integrated part of different blockchains. Many cryptocurrencies support mining, such as Litecoin or Bitcoin Cash. Other blockchains still use different mining algorithms. However, today, many hashing algorithms differ only in the way they process data.

Comparison of Electricity Consumption Between Bitcoin and Ethereum

Bitcoin remains the most energy-hungry cryptocurrency. When comparing Ethereum to Bitcoin, Ethereum’s Proof of Stake consensus targets a 99% reduction in electricity consumption . By comparison, Bitcoin’s PoW continues to grow, as it has surpassed total electricity consumption across Switzerland. With the move to ETH 2.0 , the network is joined by validators instead of miners. From there, it becomes more sustainable and creates less carbon emissions for the environment.


Blockchain technology has become the most influential invention of the past century, shaping the future of technological development. Hashing is a cryptographic function that strengthens this technology. It is necessary to understand what hashing is and the nature of the technology to be able to mine in the blockchain and make money from it.

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