The creation of digital currencies and means of obtaining cryptocurrency is a complex collection of items. One of these items is the principle of a hash function. Hash is not specifically tied to the creation of digital currencies alone, it is used in regular computation for the completion of tasks such as validating the level of authenticity of new information entering the system.
Although hash is generally viewed as weak in terms of cryptography due to its being solvable in polynomial time. However, they can not be deciphered easily. The difficulty of access by unwanted parties here is because the hash functions used in the creation of digital currencies and add more layers of special security features. This makes it virtually impossible for a none authorized party to view information from either the sender or receiver’s end.
The Creation of Digital Currencies
To be more specific, the cryptography of these hash functions is known to combine three major properties. They are
- Collision-free. This implies that two different inputs can not be matched to map unto the same output hash.
- Undetectable. This implies that they can be hidden. As such, it would be hard for a party to guess the input value of a particular hash function from its output.
- Complex. The hash function should be puzzling, making it difficult to choose an input value that can produce a predictable output value. As such, the input value must be selected from a range as wide as possible.
The entire concept of the creation of digital currencies is built on blockchain technology, which is a globally accessible ledger that involves different blocks of transaction data being linked together on a network. The content of the blockchain itself is simply transactions that have been previously executed and validated.
This brings about a kind of security that prevents fraudulent actions and double-spending. The result of this process is an encrypted value that is made up of numbers and letters which is known as a hash. The hash is completely from the original data used, making it safe for the party where the transaction originated. This hashing process is also applied in the mining creation of digital currencies.
Hashing and Digital Currencies
Hashing is an operation of the creation of digital currencies that involves data examination from a block using a mathematical function that produces an output of a specified length. To solve the hash, the data in the block header is used to decrypt math puzzles. In each block, there is a version number, a timestamp, the previously used hash, the Merkel root hash, the hash being solved for, and the nonce.
Mostly when this solution is underway, the focus of the node is the nonce, which is essentially a string of numbers. The number here is attached to the hashed portion of the former block and then hashed. After this process is complete, if the resulting data hash is lower than or equal to the specified target hash, then it is verified as the solution and the node is rewarded right before the new block is added to the existing blockchain.
The process may seem easy but is quite complex. The action of this process is responsible for trading possibilities on platforms like Bitcoin Circuit. Providing a solution to the hash involves the miners discovering the specific strings that fit into being the nonce. This process alone involves a lot of trial and error. The reason for this being that a nonce is essentially a random string of numbers.
This makes it highly unlikely for a node to easily come up with the accurate nonce on the first guess. Hence, the miner would have to test a couple of nonces before arriving at one that would perfectly fit. The thing about nonces that makes it an even more tedious process is that they have different difficulty levels. Some target hashes require more work to attain than others. This implies an even longer time for the trial and error process by the miner. Taking all of this into consideration, it is only valid that the validation process is carried out delicately.