The Role of Cryptography in Crypto: Hashing, Blocks, and Mining Explained

Book: Cryptocurrency QuickStart Guide: The Simplified Beginner’s Guide to Digital Currencies, Bitcoin, and the Future of Decentralized Finance
Author: Jonathan Reichental
ISBN: 978-1-63610-041-8

Previous: How Cryptocurrencies Work
Next: Bitcoin: A Complete Guide for Beginners

The word “crypto” gets thrown around constantly. Most people using it have no idea what it means. Chapter 3 fixes that. The “crypto” in cryptocurrency comes from cryptography, which comes from Greek words meaning “secret writing.”

Once I understood that connection, the whole system felt less like magic internet money and more like applied math. Still weird. But grounded weird.

Cryptography 101: secret writing

Satoshi Nakamoto’s Bitcoin paper never uses the word “cryptocurrency.” It says:

“What is needed is an electronic payment system based on cryptographic proof instead of trust.”

That one sentence is the whole philosophy. Replace trust in institutions with math.

Encryption = writing in a secret code
Decryption = reading that code with the right key

Modern crypto does not use simple substitution ciphers. Those are broken too easily. It uses something far more powerful: hashing.

From substitution ciphers to hashing

Reichental starts with old-school cryptography. A basic substitution cipher shifts letters: A becomes B, B becomes C. Fun for puzzles. Useless for security today.

Poe’s “The Gold-Bug” and WWII’s Enigma machine show how codebreaking evolved into modern computer science. But substitution ciphers get cracked in seconds now. Crypto needs something one-way: hashing.

What is a hash?

A hash is a one-way cryptographic function. Feed it any input. Get a fixed-length output that is practically impossible to reverse.

Key properties:

• Any input length produces the same output size
• Same input always gives the same hash
• Tiny input changes produce completely different outputs
• You cannot work backward from the hash to the original input

Example from the book: “100 cowries” and “101 cowries” produce totally different 64-character hashes. No visible pattern connects them. Change one digit and the output looks unrelated.

Bitcoin uses SHA-256 (part of the SHA-2 family). The 256 means 256 bits in the output. Those bits convert to 64 hexadecimal characters (0-9 and A-F).

Input goes in, SHA-256 produces 256 bits, converted to 64 hex characters. One-way trip. You do not need the math internals to understand what it does.

How hashing links blocks together

This is where the blockchain becomes a chain instead of just a list.

Each block has two parts:

• Body: The actual transaction data
• Header: Metadata about those transactions

The header includes:

• Hash of the previous block’s header
• Timestamp
• Merkle root (a hash of all transactions in the block)
• Other data points

Each new block’s header contains the hash of the previous block’s header. Change anything in an old block and its hash changes. That corrupts every block after it. The chain breaks.

This is what makes blockchain immutable in practice. You cannot sneak in and edit a past transaction. The hashes will not match. The network will reject the altered chain.

Change an old block and every hash after it breaks. The network rejects the altered chain. The only workaround is a 51% attack (Chapter 2), expensive and unlikely on major networks.

Hashing and the mining competition

Mining uses hashing in a second way. This is the part that made my brain hurt, but also the part that made everything snap together.

When a new block is ready to be created, the process goes through phases:

Phase 1: Transactions queue up. Broadcasts from around the world land in the mempool. They wait to be hashed into a Merkle root for the new block.

Phase 2: The system generates a target hash. Miners must produce a hash equal to or less than this target. How? By guessing a number called a nonce (number used only once). Add the nonce to the block header, hash the whole thing, and check if the result beats the target.

Phase 3: Guess, guess, guess. Miners cycle through nonce values at insane speed. The Bitcoin network makes roughly 190 quintillion guesses per second across ~50,000 nodes. That is not a typo.

Phase 4: Winner found. A miner finds a nonce that produces a valid hash. They broadcast it. Other nodes verify. Consensus reached.

The winner’s block gets confirmed, appended to the chain, and replicated across all nodes. The difficulty target auto-adjusts so Bitcoin mines roughly one block every 10 minutes.

The nonce guessing game

Finding the right nonce is brute force. No clever shortcut. Just try number after number until one works.

The target hash starts with a certain number of leading zeros. More zeros = harder puzzle. Your hash must be less than or equal to the target.

The odds of guessing correctly on the first try for Bitcoin? About 1 in 66 billion trillion.

That is why miners use specialized hardware burning massive electricity. Some machines test a hundred trillion nonces per second. The solution always comes through raw computational power, not elegance.

When I read that number, proof-of-work stopped feeling abstract. It is literally a global guessing competition where the prize is newly minted coins. Weird? Yes. Effective? Also yes.

My honest take

This was the most technical chapter so far. The nonce guessing game sounds silly (“they just guess numbers really fast”) but that simplicity is the point. No backdoor. No admin override. Just math and electricity.

Hashing is one-way. Block headers chain blocks together. Mining is brute-force nonce search. The difficulty target self-adjusts to keep block times steady.

What still feels wild: 190 quintillion guesses per second on Bitcoin, the environmental cost, and the fact that “cryptographic proof instead of trust” replaces how every bank operates.

Reichental wraps Part 1 here. Part 2 covers Bitcoin, Ethereum, and the rest of the crypto universe. If chapters 1-3 felt like a lot, that is normal. You now understand more than most people who own crypto.

Next up: Bitcoin itself. Origin story, forks, and where it might be headed.