What is SHA-256 and How Does it Relate to Bitcoin Mining?

What is SHA-256 encryption algorithm and why is it so popular in the cryptocurrency world? Below we explain the reasons why.

What is SHA-256?

SHA-256 is a cryptographic hash function that takes a random size input and produces an output of a 256-bit fixed-size hash. 

Such hashes are powerful due to their one-way output. Put in simple words, you can produce a hash output from any given input but you cannot reconstruct the given input data from the same hash output.

How exactly is SHA-256 used?

It highly depends on the cryptocurrency itself since every coin is different. To give an example, SHA-256 is used in several ways in the Bitcoin network. Mainly, however, it is used for mining, as it uses the PoW algorithm, and for creating new Bitcoin addresses.

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