A hash in the blockchain ecosystem is an algorithm. yesIt is used to encrypt data and create a unique character string with which to operate safely.
In other words, this cryptographic function is used to verify the authenticity of data, store passwords securely and sign digital documents. For this reason, it is considered one of the pillars on which the blockchain sector is based. Consequently, it is also the basis of all the projects that rely on this technology.
Cryptocurrency hashes vary by project. Because if there are different options when it comes to performing cryptographic functions, there are also different ways to implement them.
Characteristics and hash function in cryptocurrencies
The main characteristic of the hash is to try to give a different value and without any relation to a data or data set of any type. That way, if someone intercepts the message, they won’t know what kind of data they’re dealing with.
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This type of digital security is essential for users to see their identity protected, the security of their digital assets and anonymity when operating.
On the other hand, it should be noted that the characters that are generated to hide the original identities of the ‘wallets’ (translated into Spanish would be a wallet) and that serve as a store for our digital assets are fixed. This means that they neither change nor rotate, since they serve to seal the blocks of operations in the blockchain chain itself, in order to keep a record of it.
Otherwise, we would be talking about the so-called ‘security token’. Which are used in the business environment to provide more security to certain business sectors.
Hash types and PoW factor
In the field of cryptography, there are two algorithms that are generally the most used. These are the RIPEMD and SHA.
Although the SHA is the standard in the sector, it is its versions that have to be taken into account, since they evolve as technology advances. Special attention is given to SHA-256, the algorithm used in Bitcoin (BTC) and its spin-off, Bitcoin cash (BCH), among other projects.
On the other hand, the RIPEMD algorithm is also considered an alternative to SHA. The issue is that it is not so widespread and the most used is the SHA in its latest versions.
In another order, so that these algorithms can be profitable in the system, the PoW (Proof of Work) was implemented in the blockchain technology. This factor is very important in order to demonstrate to the network that an operation has been duly verified. All this before including it in the block chain, since it certifies that the exposed information is correct.
The actors who benefit from the PoW in the blockchain networks are called ‘miners’, since their verification work leads to a reward in the form of cryptocurrency from the network.
Examples of the use of hashing in cryptocurrencies
As mentioned above, hash functionality forms part of the foundation of blockchain technology.
Then, we can find situations in which its usefulness is reflected, such as the following:
- Wallet A wants to send 10 tokens to Wallet B. In this case, the transaction will be public, but the identity of the participants will be protected. Although wallets A and B have a specific owner, their names and surnames will not appear in the block chain follow-up, but rather a string of characters fixed to each wallet.
- A real estate agency sends a Smart contract to a potential tenant to rent a home. In this case, for the contract to be signed by the lessor (the person who is willing to rent the property) must have the permission and confirmation of the lessee (owner or beneficiary of the property). These types of operations can be carried out anonymously with established clauses and rules.
One case could be where the lock was electronic. If the tenant has not paid the rent that month, he could deny the right to enter the house if the contract establishes it and it is signed by both parties.
In short, the hash in cryptocurrencies is one of the cornerstones of a technology that has many opportunities and options that have not yet been explored.