What is Hashing in the Bitcoin Mining Process?

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  • Bitcoin hashing is a crucial aspect of Bitcoin mining, but not many people know what it is
  • The hash is a kid of reference number of all the transactions that take place in a Bitcoin block
  • Using hashing helps keep transactional data small

The Bitcoin mining process is an incredibly important task that enables the network to continue processing transactions, and without it, Bitcoin simply wouldn’t work. A crucial aspect of Bitcoin mining is hashing. Hashing, like much about Bitcoin mining, is rather complicated and very few people fully understand how it works, but hashing is the reason all those millions of transactions fit into one neatly bundled block. Our quick guide breaks down the basics of Bitcoin hashing.

Hashing Keeps Big Data Small

Every Bitcoin block has a maximum size of 4 megabytes, but this size isn’t completely used, with around 2 megabytes used in every block. These blocks contain all of the transaction data from the 10-minute window each Bitcoin block utilizes, and it’s these blocks that keep the network running smoothly.

Rather than writing out each transaction into the block, miners race to create a hash that contains all of these transactions. This hash is then essentially used as a reference number. Thanks to Bitcoin using SHA-265, each hash is exactly the same length – 64 characters.

Why Is This Good?

By using SHA-256, all hashes are the same length,, which makes it easy to store, use and compute them. Imagine a world where the hash could be 64 characters, 664 or even 6664 characters – it would be mayhem. Coincidently, 64 characters in the hash makes it considerably more secure than using an algorithm such as SHA-128. So, SHA-256 hashes, such as those used in Bitcoin, are both an ideal length and better from a security perspective.

Hashes are Deterministic

The great thing about hashes is that no matter how many times you put the same input through a SHA-256 hashing algorithm, you will always end up with the same hash. This is perfect as it makes it easy to keep track of the original input and all that transactional data. If this wasn’t the case, nobody would be able to verify the transactions you made in the block and the whole network would fall apart.

More Hash Rate is Good, Right?

There is a good chance that every few weeks you read about the Bitcoin network hash rate reaching a new all-time high, or a huge chunk dropped off. All this means is that more or fewer people have their mining rigs activated to try and win the next block. A higher hash rate means that the network is more secure against 51% attacks, but that’s all. Blocks still take 10 minutes to be mined and the block size is still capped.

So, there you have it. Hashing both keeps the transactional data small and helps users ascertain the transactional data at any time.