In this installment of our blog post, we’re revisiting fundamental concepts of blockchain to see how it is secured from the inside.
Since most of the security in crypto and blockchain comes from cryptographic hash functions, a deep dive into the concept is always worthwhile.
Hashing blockchain: Highlights
Due to its unique properties, hashing is instrumental to P2P networks, used not only to verify data but to keep the whole network secure and impossible to tamper with.
- Hashing is the process by which any type of data fed to the algorithm gets an output that is unique to that provided data;
- Multiple algorithms designed for encrypting data – hashing functions – are employed in this process;
- It simplifies data verification and detection of any alterations in the input data;
- Hashes makes data easier and faster to validate and then store it securely across the decentralized network.
Let’s break down bit by bit how hashing works, and how it applies to the blockchain and helps protect data.
What is hash in blockchain?
Hashing is a part of general cryptography, more specifically, a process by which any data type can be formatted into a fixed-length output.
A hash of a given set of data, generally a string of characters, is a unique value that ideally only results from that set of data.
Blockchain Hash Example
Hashing is the core method by which tamper-proof ability is maintained in blockchain.
How blockchain hashes work
Let’s address some unique qualities of hashing to better understand why and how it secures blockchains and proves the authenticity of stored data.
- Generates an output that bears no apparent relation to the submitted data:
It’s highly impractical to try and generate the original data from the hash value alone. Attempting to reverse the process requires immense computational resources.
- Specific input produces an identical output every single time:
Should one individual bit of original data be changed for any reason, hash values would also change – it’s a quick way to detect manipulations with the source data or file.
- No two different inputs should result in the same hash value:
This property known as collision resistance is a critical requirement for blockchain hash functions. While the absolute impossibility of collisions is not guaranteed, it ensures that finding collisions requires computationally infeasible resources.
- Regardless of the input size, the output size is fixed:
This simplifies handling data, as hash values always occupy a set amount of space, making them easy to manage and calculate.
- Swift execution:
It doesn’t take long for the algorithm to complete, which speeds up various computational tasks, especially those involving large datasets or frequent data comparisons.
To sum it up, the process of creating hashes is designed to be fast to implement, but slow and resource-intensive for finding the original input.
What is a hash function?
A cryptographic algorithm that takes an input, puts it through certain rounds of operations and produces a particular kind of output is called a hash function.
Hash Function Example
There are multiple algorithms and each has its own structure and operations, leading to variations in how input data is processed and transformed into hash values.
For example, different functions can produce outputs of varying lengths, commonly measured in bits.
SHA-256 is by far the most widely used algorithm in blockchain technology. The list of some blockchain hash functions that users and developers may encounter in certain contexts is provided below.
| Algorithm | Hash value (bits) | Use cases |
|---|---|---|
| SHA-256 | 256 | encoding transactions, block headers, and various cryptographic operations |
| SHA-512 | 512 | requires more computational resources; implemented in protocols that prioritize security and resistance to cryptographic attacks |
| Keccak256 | 256 | Used in Ethereum for hashing validating blocks, transactions, and smart contract code |
| RIPEMD-160 | 160 | commonly used alongside SHA-256 in address generation for cryptocurrencies like Bitcoin |
| Blake2 | 8–512 | used decentralized storage solutions, such as IPFS (InterPlanetary File System), for content addressing |
Some functions may be specific to certain protocols or emerging technologies, leading to differences in their usage and acceptance within the ecosystem.
How is hashing used in blockchain?
Hash functions are involved in almost every aspect of cryptocurrency networks. While it’s practically impossible to list all of the use cases, we’ll dissect the role of hashing following the lifecycle of the transaction.
1. Transaction identification
Before being included in the network, every single transaction is assigned a unique identifier. This hash is generated by submitting the transaction data (including sender, receiver, amount, etc.) to an algorithm adopted by the protocol.
Image from Etherescan
Once computed, it is included in the next block and becomes part of the ledger.
2. Securing the block
The block header (which includes information about the block and its contents) is hashed using the same algorithm.
Let’s look directly inside one of the Ethereum blocks by calling the ETH node directly:
curl --location --request POST 'https://go.getblock.io/\ --header 'Content-Type: application/json' \ --data-raw ‘{ "jsonrpc": "2.0", "method": "eth_getBlockByHash", "params": [ "0x29fa42e9aeab0ac75049300ac7d8a390b34350c771c44e0e9aeed2b089e5e2c9", false ], "id": "getblock.io" }
Each block contains a reference to the previous, known as the “hash pointer” or "parent hash," generated based on the data stored in that previous block.
This means that altering any data within a block would necessitate changing its hash, consequently impacting the subsequent block's identifiers.
This cascading effect continues throughout the blockchain, making it exceptionally challenging to tamper with historical records.
3. Enhancing the consensus
In Proof-of-Work networks like Bitcoin, hash functions are used to calculate the values of block headers as part of the mining process.
Miners search for a specific number called a nonce, calculating random hash values until they find the one that matches certain criteria set forth by the protocol.
This process demands substantial electricity and computing power and therefore acts as a barrier against attacks and enhances trust in the network's operation.
N.B. Smart contracts can verify data authenticity and integrity using its hash, avoiding the need for direct on-chain storage, similar to how NFT metadata is stored on IPFS while only its hash is sent to the blockchain. Explore further in our IPFS guide.
H2: Wrapping up
Applications of hashes in blockchain span wider than mere transaction or block identification and verification. Based on the same principles, it reduces storage requirements without losing a bit of data, helps verify the integrity of smart contracts deployed to the network, and much more, ultimately making cryptocurrency networks resistant to manipulation.
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