What is a hash used for?

Welcome to the cryptohunt jam where we spend one minute a day to explain crypto. In plain english.

No doubt: You’ve heard the word hash thrown around by crypto enthusiasts. Strap in, this is a complicated one, but we’ll break it down. And hey - we guarantee you that lots of those crypto folks don’t actually know what it means either and are just trying to impress you, so here’s your chance to get ahead!

First, let’s talk about the purpose those hashes solve: Simply said, they help prevent fraud in blockchains.

Here’s how that works: Remember that blockchains are nothing other than long lists of transactions, stored as separate copies on many different computers. Altering the history of that blockchain is attractive to hackers, because they could create a different record that suddenly shows them as having lots of crypto.

When people pay with crypto, each group of payments gets summarized as a hash after they have been recorded. The hash is a math function which takes all of those transactions, and that could be a lot of information, and compresses them into a really short, but unique text. It is very easy for a computer to summarize things into a hash, but almost impossible to turn a hash into the original data.

It’s like your fingerprint: All of your genes come together when you are born, resulting in hands with a unique fingerprint for each finger. It works in that direction for every human being, every time. Even identical twins don’t have matching fingerprints. But nobody can take your fingerprint and recreate your DNA from it.

But what does it do for a blockchain? Well, in one direction it makes it very easy to verify that all transactions in a blockchain are correct, but in the other it makes it super hard to unwind them and create an altered history.

And now that we at least know what hashing is used for, let’s look into the role the NSA played in enabling Bitcoin. It’s a pretty big one! Stay tuned for the next episode.

Disclaimer: This podcast references our opinion and is for information purposes only. It is not intended to be investment advice. Do your own research and seek a duly licensed professional for investment advice.