The finance and technology sectors are heading for a radical transformation. Blockchain is one of the main technological players in this revolution. While blockchain is a major driving force in the world of cryptocurrencies such as Bitcoin and Ethereum, it is much more than merely a ledger recording financial transactions. Blockchain provides a secure, transparent, and immutable record of all information kept in that blockchain without intermediaries acting as a central authority. But what is Blockchain Technology? Read on to know this answer and other aspects related to it.
You will get to know about Blockchain Technology through basic cryptographic principles: hashing. Although hashing might sound complicated, it is a simple yet brilliant cryptographic mechanism that inscribes the security and trust into each block on the blockchain. On this blog, you will fully explore hashing and how it acts as the digital “glue” and “fingerprint” of each record of blockchain technology.
What Is Blockchain Technology?
Blockchain is a decentralized digital ledger that records transactions across many computers. A blockchain differs from a traditional centralized database in that once something is recorded, it cannot be altered retroactively without changing every subsequent block.
Every block in a blockchain is made up of:
- A list of transactions
- A timestamp
- The hash of the previous block
- A hash for the current block
It is the concept of hashing that guarantees data integrity and ultimately makes blockchain secure.
What are the Characteristics of a Blockchain?
There are various defining characteristics or properties of a blockchain that you should know about. Some of these characteristics are:
Decentralization
There is no central server or governing body. The network is scattered across many computers, meaning that control is given to the users of the blockchain and not one entity.
Immutability
Once something is recorded on the blockchain, it is nearly impossible to change or delete it. If the user made an error in a transaction, the user simply creates another transaction to reverse the error, and both transactions stay present on the ledger.
Transparency
Every participant sees the same history of transactions on the blockchain (or a fake blockchain), creating an auditable record.
Consensus
All nodes must come to an agreement before a new block can be added to the chain. If one node does not agree, a new block will not become valid on the network.
What is Hashing in Blockchain?
Hashing is a way to map any input, such as text, a file, or a transaction, into a fixed-length string of characters. The resulting output, a hash, is produced through a hashing algorithm. A hashing algorithm guarantees that even the smallest change to the input produces a completely different hash. This makes it a very suitable means of guaranteeing data integrity. Hashing enhances security in Blockchain.
Example:
- Input: “Blockchain”
- Output (SHA-256): 5df6e0e276135f7eacb867d8f3c2c8a71e539fc88c8f4d6f4d34571d896b6bbd
If you change the input to “blockchain,” with a lowercase b, the full hash changes. This illustrates the precision and sensitivity of hashing.
How Does Hashing Improve Blockchain Security?
Apart from knowing about ‘what is blockchain technology’, you should also know that hashing is a key aspect of blockchain security in several ways:
1. Data Integrity
The hash of every block in the blockchain depends on the data of the block and the hash of the preceding block. If someone tries to edit the block data, the hash would change, making the link to the previous block invalid. This sets off alarms across the blockchain network, indicating tampering has occurred.
2. Fast Validation
Passwords and hashes can let nodes greatly validate a transaction in a block. They can compare the hash of a current block with values they expected in the network.
3. Proof-of-Work (PoW)
Cryptocurrencies such as Bitcoin employ hashing in their Proof-of-Work consensus algorithm. This requires miners to solve a complex mathematical puzzle (hashing algorithm) in order to validate a new block that they add to the blockchain. This protects the network from spam and attacks.
4. Digital Signatures
Hash functions are also used in combination with cryptographic keys to create digital signatures that authenticate users. Digital signatures work with encrypted information to help ensure that only verified transactions are processed.
Hash Functions Commonly Used in Blockchain
| Hash Function | Bit Length | Used In | Properties |
| SHA-3 | 256 bits | Ethereum 2.0 (transitioning) | The latest standard by NIST provides better performance |
| SHA-256 | 256 bits | Bitcoin, Litecoin | Secure, widely adopted, collision-resistant |
| Keccak-256 | 256 bits | Ethereum | Basis for SHA-3, secure, high-speed implementation |
| Blake2b | 256-512 bits | Some privacy coins (e.g., Zcash) | Efficient, highly secure, better than MD5/SHA-1 |
| Scrypt | Variable | Litecoin | Memory-intensive, anti-ASIC, slows brute-force |
| X11 | 11 rounds of hashing | Dash | Multiple hashing layers for added security |
How does a Hash Secure Blockchain?
Now that we have seen the basics, let’s look at how hashing adds to the blockchain protection more specifically. Exploring it is as important as knowing ‘what is blockchain technology.
1. Denial of Data Corruption
If an attacker attempts to manipulate a transaction in a block, that block’s hash changes. This means that the next block will not be ‘connected’ because it has the previous block hash in it. To manipulate the blockchain, a user needs to do the following:
- Change the hash of the manipulated block
- Change each of the following blocks’ data
- Change their hashes
- Do this work faster than the rest of the network
This is almost impossible in larger blockchains like Bitcoin due to the power needed.
2. Secure Block Find
When mining, a miner must create a block hash which meets a set condition ( has to begin with a certain number of 0s) which takes miners a long time because the miner is required to make trillions of hash attempts (it tries endless variations of the nonce – a random number added to the block data – until it finds a working hash), this is why mining is called Proof-of-Work. It not only stops spam but also pays the miners for their work and effort.
3. Trustless Verification
Blockchains are decentralized, meaning that the participants in the system do not have to trust each other, rather trust the math that goes into the hash. Each participant can calculate the hash of a block, confirm the content of the block (i.e., the integrity of the block), and thus, validation is guaranteed.
Hashing Algorithms: The Backbone of Blockchain Security
As stated before, a hashing algorithm is a formula and/or method of creating hashes. When inquiring ‘what is blockchain technology’, you should know that Blockchain is not limited to a few hashing algorithms, but any hashing algorithm must satisfy the following criteria:
- Deterministic: The same input generates the same hash.
- Fast Computation: Hashes should be generated quickly.
- Pre-image Resistance: It should be computationally difficult to reverse the original input from the hash.
- Collision Resistance: Two different inputs should not create the same hash.
- Avalanche Effect: A minor change in input should create a drastically different hash.
If anything did not have a strong hashing algorithm, blockchain systems could be subject to various attacks, such as collision attacks, brute force, and pre-image attacks.
Hashing in Blockchain: Use Cases beyond Cryptocurrencies
While hashing seems to be related to Bitcoin and Ethereum, there are numerous uses beyond cryptocurrency where hashing plays a role in the assurance of security for blockchain, such as:
1. Smart Contracts
Smart contracts executed on Ethereum and similar platforms utilize hashing to both verify and track state changes made to contracts. This only occurs when the correct conditions are executed in code.
2. Supply Chain
When supply chain blockchain solutions are created, a checkpoint for each product can be hashed to the ledger. This means traceability and proof of authenticity for goods.
3. Voting Systems
Voting applications on blockchain use hashing to hide the voter and ensure vote validity.
4. Digital Identity
Some hashed credentials can be included in a blockchain system in order to verify a digital identity while protecting someone’s information.
What are the Limitations of Hashing in Blockchain?
There are still drawbacks to hashing in blockchain.
- Energy Consumption: In the case of proof-of-work systems like Bitcoin and others, a lot of significant computational power and energy are used for hashing.
- Quantum Computing: In the future, quantum computing may reverse hashes, which threaten hash function algorithms.
- Hash Collisions: Hash collisions are not common in secure hash functions, but they continue to threaten hash function security in collision attacks on algorithms. Most hashes are not vulnerable, and collisions are forgettable; they are still something to think of when using outdated algorithms.
The possibilities for blockchain depend primarily on cryptographic tools such as hashing, and by being proactive in the fight against threats, you can increase the chances that blockchain technology will last indefinitely.
Conclusion
Now you know the answer to the question, ‘What is Blockchain Technology?’. But exploring hashing is equally significant to understanding blockchain. Hashing is more than a mathematical gimmick – it is at the very heart of blockchain security. Hashing provides security to blocks, secures transactions, and secures the consensus mechanism and distributed consensus. Hashing drives the blockchain to be secure and tamper-resistant.
A better understanding of how a hash works for securing blockchain technology helps explain the trustworthiness in using blockchain for everything from commercial and financial transactions involving cryptocurrency, smart contracts, etc. New hash functions, better hashing algorithms, and new ways to hash will only increase the long-term security of blockchain; if not, it is a heads up.
FAQs (Frequently Asked Questions)
1. What Hash Functions are Used in Blockchain?
SHA-256 and Keccak-256 are hash functions widely accepted in the blockchain space, as they allow digital data to be transformed into fixed-length strings of characters to ensure data integrity and consistency.
2. How Does Hashing Help Security in Blockchain?
Hashing helps to create security in blockchain by connecting data blocks through their cryptographic hash. Any changes in the data will also change the hash and therefore indicate that someone has tampered with it.
3. What are Examples of Hashing Algorithms That Have Been Used in Blockchain?
There are many hashing algorithms, but examples of hashing functions are SHA-256 (used in Bitcoin), Keccak or SHA-3 (used in Ethereum), and Scrypt (used in Litecoin). Each has its own security aspect.
4. What is the Significance of SHA-256 in Blockchain Technology?
SHA-256 is significant because it provides a secure one-way hash that guarantees data immutability. It is used in Bitcoin to secure transaction data and connect blockchain data blocks.
5. What are the Characteristics of a Good Hash Function to Use in Blockchain?
A good hash function is deterministic, fast, collision-resistant, and irreversible. These characteristics would make it perfect to secure blockchain data.
6. Can Two Different Inputs Produce the Same Hash in Blockchain?
Doing this is referred to as a collision, and this is nearly impossible to occur when using a strong hash function, like SHA-256. Collision resistance allows for the blockchain to be secured and maintained.
