How is SHA-256 used in blockchain, and why?

What is SHA-256?

A secure hashing algorithm or commonly referred to as SHA-256, is an unkeyed cryptographic hashing functionUnkeyed cryptographic hash functions are the ones which generate the hash output with just the input data as the only parameter. that takes an input of variable length and produces a 256-bit long hash output. 

Uses of SHA-256 in blockchain

SHA-256 is one of the first and most prominently used hashing algorithms in blockchains like Bitcoin, Bitcoin Cash, and Bitcoin SV. SHA-256 is used in various stages in a blockchain, most prominently:

• Consensus mechanism: Miners calculate the hash of new blocks to be created using SHA-256 by varying the value of nonce in a bitcoin block until they reach the hash below the threshold. Then that block can be accepted into the ledger. 
• Chains of blocks: Each block in the ledger contains a hash generated by SHA-256 referring to the preceding block in the chain.
• Digital signatures: Transactions use digital signatures to maintain integrity, the information used in the transaction is hashed using SHA-256, and then it is encrypted with the sender's private key to generate a signature. The miner then verifies this signature to validate the transaction.

What makes SHA-256 an ideal candidate for blockchain?

SHA-256 offers security and reliability. Here are some of the main features of SHA-256, which make it perfect to be used as the main hashing function in a blockchain:

• Collision resistant: No two input values can produce the same hash output. This ensures that every block in the blockchain ledger is assigned a unique hash value.
• Preimage resistance: The input can not be recreated given a hash value. This ensures that during the proof of work in bitcoin, the miners cannot guess the value of nonce by converting the acceptable hash back into the input; instead, they have to use the brute force method, which ensures that the work is done.

• Deterministic: The hash function's output should always remain the same, given that the input remains the same. This is a basic property of digital signatures, as the computed hash against a given input should remain consistent when calculated by the receiver and sender.
• Large output: The 256-bit output adds up to $2^{256}$ possibilities making it impossible to apply the brute force solution to crack the hash.
• Avalanche effect: If there is a small change in the input, the output changes dramatically. This makes sure that the hash value can not be guessed based on the input values. This makes the hash more secure.

These features of the SHA-256 make it an ideal candidate for blockchains as it provides security and reliability like no other.