When you send Bitcoin or Ethereum, you’re not just moving coins-you’re relying on math that can’t be broken. At the heart of every transaction, block, and wallet address is a hash algorithm. These aren’t just fancy math functions. They’re the invisible locks that keep cryptocurrencies secure. If one of these algorithms fails, the whole system could unravel. But not all hash algorithms are the same. Some are fast, some are memory-heavy, and some were built specifically to stop big mining companies from taking over.
SHA-256: The Original Workhorse
SHA-256 is the reason Bitcoin still exists. Satoshi Nakamoto picked it in 2008 because it was proven, reliable, and widely studied. It turns any input-whether it’s a single word or a million transactions-into a 64-character string of letters and numbers. That output is always the same for the same input. Change one bit, and the whole hash flips completely. That’s what makes it collision-resistant.
Bitcoin uses SHA-256 for mining. Miners race to find a hash that meets a certain target. The first one to solve it gets rewarded. But here’s the catch: SHA-256 is too fast on specialized hardware. Today, ASIC miners like Bitmain’s Antminer S19 XP Hydro can do over 300 terahashes per second. That means regular GPUs and CPUs can’t compete. As a result, mining is dominated by a handful of companies, mostly in China and the U.S.
SHA-256 also shows up in Bitcoin addresses. First, your public key is hashed with SHA-256, then again with RIPEMD-160. That final 160-bit output becomes your wallet address. It’s a double layer of security. Even if someone cracked one hash, they’d still need to break the other.
As of 2025, SHA-256 still powers about 45% of the total crypto market cap. But its dominance has dropped from 68% in 2017. Why? Because people started asking: Is this really the best we can do?
Keccak-256: Ethereum’s Custom Choice
Ethereum doesn’t use SHA-256. It uses Keccak-256-a variant of SHA-3, the winner of NIST’s five-year global competition to find a new standard after SHA-2 showed signs of aging.
Keccak uses a completely different structure called a "sponge construction." Instead of processing data in fixed blocks, it absorbs input like a sponge and then squeezes out the output. This makes it more resistant to certain types of attacks, like length extension attacks, which SHA-2 is vulnerable to.
But here’s the twist: Ethereum’s version isn’t exactly the same as NIST’s official SHA3-256. It uses different padding rules. That was intentional. The Ethereum team wanted to avoid accidental collisions between Ethereum and other blockchains using SHA-3. It’s a small change-but it prevents cross-chain attacks.
Keccak-256 is faster than SHA-256 on regular CPUs, making it ideal for smart contracts. Ethereum’s Merge in 2022 switched from proof-of-work to proof-of-stake, but Keccak-256 is still used everywhere: for transaction hashes, contract addresses, and block headers. It’s now used in 22% of top cryptocurrencies, up from just 5% in 2017.
By 2025, Ethereum plans to fully adopt the official SHA3-256 standard. That’s not because Keccak is broken-it’s because standardization makes integration with other systems easier. Think of it like switching from a custom engine to a certified one.
Scrypt: The Memory-Hard Alternative
Litecoin launched in 2011 as "the silver to Bitcoin’s gold." Its creator, Charlie Lee, wanted to make mining more accessible. So he chose Scrypt-a hash algorithm designed to be memory-intensive.
Unlike SHA-256, which relies on raw processing power, Scrypt forces miners to use a lot of RAM. Each hash calculation needs 32 times more memory than SHA-256. That made it hard for ASIC manufacturers to build efficient hardware back then. For a while, regular users could still mine Litecoin with their GPUs.
But ASICs caught up. By 2018, companies like Bitmain released Scrypt ASICs. Mining became centralized again. Today, Scrypt is mostly used in legacy coins like Dogecoin and Vertcoin. It’s no longer the silver bullet it was meant to be.
Still, Scrypt taught the crypto world something important: you can design algorithms to resist centralization. That lesson shaped everything that came after.
BLAKE2b: Speed Meets Efficiency
BLAKE2b is the quiet superstar. It’s not as famous as SHA-256 or Keccak, but it’s faster, more energy-efficient, and used in high-speed networks like Nano.
BLAKE2b was designed in 2012 by cryptographers who wanted to improve on SHA-3 without sacrificing security. On modern CPUs, it processes hashes in under 400 nanoseconds-faster than SHA-256 and even Keccak. It’s also more energy-efficient: Nano’s network uses only 0.05 kWh per 1,000 transactions. Bitcoin? Around 950 kWh for the same number.
Nano uses BLAKE2b for its block hashing and digital signatures. That’s why it can handle 7,000 transactions per second with near-instant confirmations. Most other blockchains can’t touch that.
BLAKE2b is also used in Zcash’s shielded transactions and as a key derivation function in many wallets. Developers love it because libraries are easy to use, documentation is solid, and it’s been audited by top cryptographers.
But here’s the downside: BLAKE2b isn’t as battle-tested as SHA-256. Bitcoin’s network has processed over 900 million blocks without a single hash collision. BLAKE2b has been around for 13 years-solid, but not ancient.
Equihash: The ASIC-Resistant Experiment
Zcash launched in 2016 with a bold promise: mining will stay open to everyone. To make that happen, they used Equihash-a memory-hard algorithm designed by two university professors.
Equihash requires 140MB of RAM per hash calculation. That’s way more than SHA-256 or Scrypt. The idea was simple: if you need a lot of memory, you can’t build cheap ASICs. GPUs and CPUs would still be competitive.
For a while, it worked. Miners used consumer-grade graphics cards. But then, in 2022, Innosilicon released the Z15 ASIC miner. It did 1,500 sol/s-crushing GPU profitability. Zcash’s ASIC resistance collapsed.
Equihash didn’t fail because it was poorly designed. It failed because ASIC manufacturers found ways to optimize memory bandwidth. The lesson? ASIC resistance is temporary. If there’s money to be made, someone will build a chip to take it.
Still, Equihash influenced other projects. Bitcoin Cash’s fork, Bitcoin SV, briefly tried it. Some privacy coins still use it. But today, it’s mostly seen as a historical experiment-a proof that you can try to fight centralization, even if you eventually lose.
Why Does This Matter to You?
You don’t need to understand how SHA-256 works to send Bitcoin. But if you’re holding crypto long-term, you should care about the algorithm behind it.
SHA-256 is secure-but centralized. Keccak-256 is modern and flexible, great for smart contracts. BLAKE2b is fast and green, ideal for payments. Scrypt and Equihash tried to level the playing field-and mostly failed.
What’s next? Quantum computing. Google’s 70-qubit processor in 2023 proved quantum machines are advancing fast. SHA-256 could be broken by quantum computers in 10-15 years. That’s why Ethereum is switching to SHA-3. That’s why NIST is pushing quantum-resistant standards.
Future blockchains will need to be algorithm-agile. That means they can swap out hash functions without breaking the whole network. Bitcoin can’t do that easily. Ethereum can. Nano already does.
What Should You Look For?
If you’re choosing a cryptocurrency to invest in or use:
- For maximum security and history: Go with SHA-256 (Bitcoin). It’s been tested longer than any other.
- For smart contracts and DeFi: Look for Keccak-256 (Ethereum). It’s built for flexibility.
- For fast, low-cost transactions: Check out BLAKE2b (Nano). It’s the quiet leader in efficiency.
- For mining: Avoid SHA-256 unless you have ASICs. Scrypt and Equihash are dead ends.
- For long-term safety: Prefer projects using SHA-3 or planning to adopt it. Quantum threats are real.
There’s no single "best" hash algorithm. Each one solves a different problem. The best crypto projects don’t just pick a hash function-they pick the right tool for the job.
What is the most secure hash algorithm for cryptocurrency?
SHA-256 and SHA-3 (Keccak-256) are both considered secure with no known practical attacks. SHA-256 has been battle-tested over 15 years in Bitcoin’s $500+ billion network, making it the most proven. SHA-3 offers better theoretical resistance to certain attacks and is more future-proof against quantum computing. For most users, either is safe.
Why does Bitcoin use SHA-256 instead of something newer?
Bitcoin uses SHA-256 because it was the best available option in 2009. It was standardized, well-understood, and had no known weaknesses. Changing it now would require a hard fork-something the Bitcoin community avoids unless absolutely necessary. The security of Bitcoin doesn’t come from the algorithm being perfect-it comes from how long it’s been tested and how much value depends on it.
Can I mine cryptocurrency with my regular computer today?
Not profitably with SHA-256, Scrypt, or Equihash. ASICs and optimized GPUs have made home mining unviable for these algorithms. Some newer coins using BLAKE2b or custom algorithms might still allow CPU mining, but rewards are tiny. Mining today is a business, not a hobby.
Is SHA-3 really better than SHA-256?
SHA-3 (Keccak) has design advantages-it’s resistant to length extension attacks and uses a sponge construction that’s harder to exploit. But SHA-256 has over 15 years of real-world use with zero collisions. For now, SHA-256 is more proven; SHA-3 is more future-proof. The difference matters most for new projects, not existing ones like Bitcoin.
What’s the most energy-efficient hash algorithm?
BLAKE2b is the most energy-efficient. Nano’s network, which uses BLAKE2b, consumes about 0.05 kWh per 1,000 transactions. SHA-256-based networks like Bitcoin use around 950 kWh for the same volume. That’s why BLAKE2b is gaining traction in payment-focused blockchains where efficiency matters.
