SHA-256 Meaning

Jun 17, 2023 | Updated Jul 19, 2023

SHA 256 is an algorithm used in Proof-of-Work blockchains like Bitcoin to verify transactions.

What is SHA-256?

SHA-256 (Secure Hashing Algorithm-256) is the mining algorithm and hash function used on the Bitcoin network to verify transactions and regulate public addresses. A public address is a cryptographic tool that allows you to request for cryptocurrency payments to a wallet address.
The SHA-256 hash function provides additional security to the Bitcoin blockchain because it creates digital signatures when transactions are initiated. These digital signatures are used to protect vulnerable data by ensuring the integrity of the data can be verified without disclosing the content.

The algorithm is a modification to the US National Security Agency (NSA) SHA-2 algorithm. It is also used in operating systems like Unix and Windows XP SP3+.

In Proof of Work (PoW) Blockchains like Bitcoin and Bitcoin Cash, miners calculate the hash of the new blocks using the SHA-256 algorithm. To do this, the miners experiment with difference numbers (nonce) until they find the right value for the hash. The blocks on a PoW blockchain also carry a hash generated by the SHA-256 algorithm which is a reference to the preceding block. This helps to maintain the integrity of the blocks. Transactions on the Bitcoin network use digital signatures to confer integrity, and the SHA-256 hashes and encrypts the information used in these transactions.