What is a hash?
Correct answer
Answer A: A digital fingerprint of data.
Quick explanation
Bitcoin uses SHA-256, among other functions. Even a small change in the data produces a completely different hash. This makes it useful as a digital fingerprint for checking data.
Detailed explanation
SHA-256 means Secure Hash Algorithm with a 256-bit result. 256 bits equal 32 bytes, represented as 64 characters in the usual hexadecimal notation. The same input data produce the same hash, while even a small change typically produces a completely different result. Recovering the original data from the hash is intended to be practically infeasible.
A hash is not encryption or a compressed copy. There is no secret key that decrypts SHA-256. Bitcoin uses double SHA-256 in important places: data are hashed once with SHA-256, then the result is hashed again. This produces, among other things, traditional transaction identifiers, block-header hashes and links in the Merkle tree.
In mining, miners seek a block-header hash below the current target. The previous block's hash in the next header makes later alterations visible. SHA-256 is central but not Bitcoin's only hash construction; other methods and combinations are used for different purposes.
Example or everyday application
Changing just one number in a transaction produces a different transaction identifier after double SHA-256. A stored reference to the old identifier no longer matches.
Common misconception
SHA-256 is often equated with encryption, compression or Bitcoin's only hash function. SHA-256 is neither encryption nor compression, and it is not the only hash function used in Bitcoin.
Sources used
NIST FIPS 180-4 - Secure Hash Standard
This source is mainly intended for developers. The relevant information may therefore be harder to find.
Check original sourceBitcoin Developer Reference - Block Chain and Transactions
This source is mainly intended for developers. The relevant information may therefore be harder to find.
Check original source