New: Wallet recovery made easy with Ledger Recover, provided by Coincover

Get started

Up your Web3 game

Ledger Academy Quests

  • Test your knowledge
  • Earn POK NFTs
Play now See all quests

Hash

Jun 6, 2023 | Updated Mar 18, 2024
A hash is a unique string of text created by mapping a piece of data through a mathematical function to encrypt and secure the data against alteration or unauthorized access.

What is Hashing in Crypto?

Hashing is the process of transforming any type of data into a unique string of fixed-length text, usually composed of a combination of hexadecimal characters (0 – 9 and a – f). Data is hashed by passing a plaintext through an algorithmic function. The output value, called the hash value, is unique and deterministic (the same input will always produce the same output). Any slight change in the input will produce a completely different output.

Cryptographic hash functions (CHF) are designed to enable users to verify whether the input has been tampered with by comparing the hash values of the original plaintext with the transformed data. CHF are irreversible, which makes it impossible to derive the original plaintext from the hash value. This makes them ideal for securing sensitive information, such as private keys and passwords, so that even when the hash value is compromised, the original data remains protected.

In practice, this function play a major role in cybersecurity mechanisms and cryptocurrencies. They are fundamental in blockchain computations to allow faster and more secure data processing.

Hash Function in Blockchain

Hashing is used to improve the processing of blockchain transactions while upholding their integrity. Each block in the chain contains a hash value representing the data in that block, as well as the hash value of the previous block. 

For instance, the transactions on Bitcoin are processed via SHA-256, a cryptographic algorithm that generates a unique 256-bit or 32-byte value from the original data regardless of its size. Each block in Bitcoin contains a unique hash value that represents the transactions in that block and the preceding one. 

Through a proof-of-work consensus mechanism, miners engage in a computationally intensive task that involves solving a complex mathematical puzzle to find a value that produces the next block. These functions in Bitcoin allow it to record transactions at a higher rate and ensure it is secure against malicious actors.

Derivatives

Derivatives are products or contracts that obtain their value from an underlying asset like stocks, bonds, commodities, or cryptocurrencies.

Full definition

Exit Scam

An exit scam is a fraudulent practice of malicious developers or founders disappearing with investors’ funds during or after a project has launched.

Full definition

Honeypot Crypto Scam

A honeypot crypto scam employs a malicious smart contract to entice unsuspecting victims with the prospect of substantial returns or rewards. The scheme’s ultimate intent is to swindle the victim’s funds.

Full definition