What is Hash and Blockchain?

Introduction

Hash and blockchain are two fundamental concepts that form the technological foundation of Bitcoin and virtually all cryptocurrencies. Understanding these concepts is essential to understanding how Bitcoin works, why it's secure, and what makes it different from traditional financial systems.

This guide will clearly and didactically explain what hash and blockchain are, how they work individually, how they work together, and some interesting curiosities about these revolutionary technologies.

What is Hash?

Hash, simply put, is a mathematical function that transforms any information (text, numbers, images, etc.) into a unique and fixed sequence of alphanumeric characters, like a "digital fingerprint."

Main Characteristics of Hash

Deterministic: The same input will always produce the same hash. If you apply the hash function to the word "Bitcoin" a thousand times, you'll always get the same result.

Irreversible: It's not possible to reconstruct the original information from the hash. You can calculate the hash of a file, but you can't discover the file's content just by looking at the hash.

Fast to Calculate: Calculating the hash of any information is a very fast process, even for large amounts of data.

Avalanche Effect: A minimal change in the input (like adding a space or changing a letter) produces a completely different hash. This makes it impossible to create similar inputs that produce similar hashes.

Fixed Size: Regardless of the size of the original information, the hash will always have the same length. For example, the SHA-256 function (used in Bitcoin) always produces a 256-bit hash (64 hexadecimal characters).

Practical Example

Imagine you want to create a hash of the phrase "OneBitNews". Using SHA-256, the result would be:

"OneBitNews" → hash → "a1b2c3d4e5f6..." (always the same)

If you change just one letter:

"OneBitNewS" → hash → "z9y8x7w6v5u4..." (completely different)

Use in Bitcoin

In Bitcoin, hashes are used to:

• Identify each block uniquely in the blockchain
• Create links between blocks (each block contains the hash of the previous block)
• Prove that data hasn't been altered
• Create mathematical challenges for miners
• Generate wallet addresses

What is Blockchain?

Blockchain (chain of blocks) is a data structure that stores information in blocks connected in sequence, forming a chronological and immutable chain.

Structure of a Block

Each block in the Bitcoin blockchain contains:

Block Header: Information about the block, including:

• Hash of the previous block (creates the link with the previous block)
• Merkle Root (hash of all transactions in the block)
• Timestamp (date and time)
• Nonce (number used in mining)
• Difficulty (proof-of-work target)

Transaction List: All transactions included in that block.

Block Hash: Unique identifier calculated from all block information.

Blockchain Characteristics

Decentralized: There's no central copy of the blockchain. Thousands of computers around the world maintain identical copies, ensuring there's no single point of failure.

Immutable: Once a block is added to the blockchain, changing it would require recalculating all subsequent blocks and obtaining consensus from the majority of the network, which is practically impossible.

Transparent: All transactions are public and can be verified by anyone. Anyone can download the complete blockchain and verify all transactions.

Secure: Security comes from the combination of cryptography, decentralization, and consensus. To alter the blockchain, it would be necessary to control more than 50% of the network's computational power.

Chronological: Blocks are always added in chronological order, creating an immutable historical record of all transactions.

How Blocks Are Connected

Each block contains the hash of the previous block in its header. This creates a "chain" where:

1. Block 1 has its own hash
2. Block 2 contains Block 1's hash + its own transactions
3. Block 3 contains Block 2's hash + its own transactions
4. And so on...

If someone tries to alter a transaction in Block 1:

• Block 1's hash would change
• Block 2, which contains Block 1's hash, would become invalid
• All subsequent blocks would become invalid
• The network would reject the alteration

How Hash and Blockchain Work Together

Hash and blockchain work together to create a secure and reliable system:

Integrity Validation

Each block in the blockchain has its hash calculated from all its information. If any information in the block is altered, the hash will change, immediately making it evident that a modification occurred.

Connection Between Blocks

The hash of each previous block is included in the next block. This creates a chain where any alteration in one block breaks the entire subsequent chain, making alterations very difficult.

Proof of Work

Miners compete to find a hash that meets certain criteria (starting with a specific number of zeros). They try different "nonce" values until they find a valid hash. This consumes energy and proves that computational work was performed.

Merkle Trees

To efficiently organize transactions in a block, the blockchain uses "Merkle Trees." All transactions are organized in a tree where each transaction has its hash, and hashes are combined until forming a single root hash (Merkle Root). This allows quickly verifying if a transaction is in a block without needing to verify all transactions.

Curiosities About Hash and Blockchain

First Use of Blockchain: Although Bitcoin is the most famous application, the blockchain idea was first described in 1991 by Stuart Haber and W. Scott Stornetta, who wanted to create a system to digitally timestamp documents so they couldn't be retroactively altered.

Bitcoin Blockchain Size: In 2024, the complete Bitcoin blockchain occupied more than 500 GB of space. Anyone can download and verify the entire transaction history since 2009.

Hash Rate: "Hash rate" measures how many hash attempts per second the Bitcoin network is making. In 2024, the Bitcoin network processed more than 400 exahashes per second (400 quintillion attempts per second), making it one of the most powerful computational networks in the world.

Genesis Block: The first block of the Bitcoin blockchain (called "Genesis Block") was mined on January 3, 2009. It has a special hash and doesn't reference any previous block, as it was the first.

51% Attack: Theoretically, if someone controlled more than 51% of Bitcoin's hash power, they could potentially alter transactions. However, the cost to do this would be astronomical (billions of dollars in equipment and energy), making it impractical.

Hash Collisions: Mathematically, it's possible for two different inputs to produce the same hash (called a "collision"). However, with SHA-256, the probability is so low that it's considered practically impossible - lower than the probability of winning the lottery multiple times in a row.

Block Time: In Bitcoin, new blocks are added approximately every 10 minutes. This time is automatically adjusted by the network to maintain consistency, even with changes in total hash power.

Fork: When there's disagreement in the network about which version of the blockchain is valid, a "fork" can occur, creating two versions of the blockchain. This has happened a few times in Bitcoin's history, resulting in alternative versions like Bitcoin Cash.

Non-Absolute Immutability: Although extremely difficult, the blockchain is technically not 100% immutable. If more than 51% of the network agrees to change something, it can be changed. However, this has never happened in practice because participants have economic incentives to maintain the network's integrity.

Blockchain Beyond Bitcoin: Blockchain technology is used in many other applications beyond cryptocurrencies: supply chain tracking, digital identity, electronic voting, smart contracts, and much more.

Practical Applications

The combination of hash and blockchain allows:

Quick Verification: You can quickly verify if a file or transaction is correct by comparing hashes, without needing to examine all content.

Data Integrity: Once recorded on the blockchain, data cannot be altered without detection, ensuring historical integrity.

Trust Without Intermediaries: The system allows people to trust transactions without needing to trust a central authority.

Transparent Audit: Anyone can audit the entire blockchain history, promoting transparency.

Important Differences

It's important to understand that:

Hash ≠ Encryption: Hash is a one-way function (cannot be reversed), while encryption can be decrypted with the correct key.

Blockchain ≠ Database: Unlike a traditional database, the blockchain is decentralized, public, and immutable.

Blockchain ≠ Bitcoin: Blockchain is the technology, Bitcoin is an application of that technology. There are many other blockchains besides Bitcoin's.

Conclusion

Hash and blockchain are fundamental technologies that make Bitcoin and other cryptocurrencies possible. Hash provides cryptographic security and data integrity, while blockchain creates a decentralized and immutable structure to record transactions.

Understanding these concepts not only helps understand how Bitcoin works, but also opens doors to understanding other modern blockchain-based technologies and the future potential of decentralized systems.

The unique combination of hash and blockchain creates something truly revolutionary: a trust system that doesn't depend on central authorities, but rather on mathematics, cryptography, and distributed consensus. This is the foundation on which the future of digital money and many other innovations are being built.