Hash Functions Used in Bitcoin
The Bitcoin consensus algorithm is based on a cryptographic system that ensures the integrity and security of the blockchain. Hash functions play a crucial role in maintaining the confidentiality and non-repudiation properties of the network. In this article, we will explore how the block header is hashed to produce the next Bitcoin block.
Hash Functions
The Bitcoin protocol uses two main hash functions:
- SHA-256 (Secure Hash Algorithm 256): This is the main cryptographic hash function used for most Bitcoin transactions.
- Merkle Tree: This is a probabilistic digital tree data structure that allows us to verify the correctness of the blockchain.
Block Header Hash
To produce the block header, the following steps are followed:
- Compute the SHA-256 hash of the transaction in the previous block
The hash of the transaction in the previous block is used as input to the SHA-256 hash function.
- Add the Merkle root and nonce to the output
A random nonce (a unique number) is added to the output of the SHA-256 hash function, along with the Merkle root and other relevant data.
The order of operations
Here is a step-by-step breakdown of how the block header is hashed:
- SHA-256 hash of the transaction in the previous block: Calculate the SHA-256 hash of the transaction in the previous block.
- Add Merkle root and nonce
: Combine the Merkle root, nonce, and SHA-256 hash of the previous block to produce a new value.
- Hash: Apply the SHA-256 hash function to this new value.
The full hash calculation
To give you an idea of what happens behind the scenes, let’s consider the following example:
Suppose we have three blocks: Block A, Block B, and Block C. The transaction in Block A is as follows:
Transaction A (txid = 1) - value = 10
Here are the steps involved in calculating the hash of the transaction in Block A:
- Calculate the SHA-256 hash:
SHA-256(10)
- Add Merkle root and nonce: The Merkle root is generated using a randomly selected Merkle tree and a nonce (0x1234567890abcdef) is added to the result.
- Hash: Apply the SHA-256 hash function to this new value.
The resulting hash for the transaction in Block A would be: 0...012345678901234567890abcdef
Similarly, we can calculate the hashes for Blocks B and C:
- Hash of Block B:
- Transaction in Block B
Transaction B (txid = 2) - value = 20
Hash:
- SHA-256(20)
- Add Merkle root and nonce:
0...123456789012345678901234567890abcdef
- Hash:
0...01234567890123456
- Hash of Block C:
- Transaction in Block C
Transaction C (txid = 3) - value = 30
Hash:
- SHA-256(30)
Add Merkle root and nonce: 0...fedcba987654321098765432109876*
- Hash:0…01234567890123456
The resulting hash for the Block C transaction would be:0…01234567890abcdef`