How Bitcoin Uses SHA-256
Bitcoin uses SHA-256 in the following ways:
1. Mining (Proof-of-Work):
• Bitcoin miners solve a computational puzzle to add a new block to the blockchain.
• The puzzle involves finding a nonce (random number) such that the hash of the block header is less than a target value (determined by the network difficulty).
• The process:
1. The miner takes the block header (metadata about the block, including the previous block hash, timestamp, and nonce).
2. Runs it through SHA-256 twice (double-SHA-256).
3. Adjusts the nonce and repeats until the hash meets the target condition.
Example:
• Input: Block Header + Nonce
• Output: 00000000000000000abcd... (starts with many zeros, meeting difficulty)
2. Transaction Verification:
• Transactions are hashed using SHA-256 to ensure integrity.
• A transaction’s hash acts as its unique identifier (transaction ID).
• Merkle Trees are used to organize and verify transactions efficiently:
• Each transaction hash is hashed again to form a tree.
• The root of this tree (Merkle Root) is included in the block header.
3. Address Generation:
• Bitcoin addresses are derived using SHA-256 and RIPEMD-160:
• First, the public key is hashed using SHA-256.
• Then, the output is hashed again using RIPEMD-160.
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