Different Hash Algorithms Used in Cryptocurrencies: SHA-256, Keccak, BLAKE2, and More

Cryptocurrency security doesn’t come from complex encryption-it comes from hash functions. These are mathematical one-way engines that turn any amount of data into a fixed-size string of characters. Change one letter in a transaction, and the hash changes completely. No one can reverse it. That’s the foundation of blockchain trust. But not all hash algorithms are the same. Bitcoin uses one. Ethereum uses another. Litecoin, Nano, and Zcash each picked their own. Why? Because each algorithm has trade-offs in speed, security, memory use, and resistance to mining centralization.

SHA-256: The Bitcoin Standard

SHA-256 is the original workhorse of cryptocurrency. It’s what Satoshi Nakamoto chose for Bitcoin in 2009, and it’s still running the largest blockchain by market cap. The algorithm takes any input-whether it’s a single word or a gigabyte of data-and turns it into a 256-bit hash, shown as a 64-character hexadecimal string. It’s fast, deterministic, and, so far, unbroken.

But speed comes at a cost. SHA-256 is optimized for ASICs-specialized mining chips. Companies like Bitmain and MicroBT now produce machines that can do 300 terahashes per second. That’s 300 trillion guesses per second. The result? Individual miners with GPUs or CPUs can’t compete. Bitcoin mining is now dominated by a handful of corporate farms in places like Texas and Kazakhstan. This centralization is the biggest criticism of SHA-256.

SHA-256 isn’t just used for mining. Bitcoin addresses are created by first hashing the public key with SHA-256, then again with RIPEMD-160. This double-hash makes addresses shorter and more secure. Even though it’s old, SHA-256 remains trusted. Bitcoin Core developers like Pieter Wuille argue that its age is its strength-after 15 years of global scrutiny, no practical collision has been found. The algorithm is battle-tested in a $500 billion ecosystem.

Keccak-256: Ethereum’s Custom Hash

Ethereum doesn’t use SHA-3. It uses Keccak-256, a variant that’s almost the same-but not quite. The difference? Padding rules. Keccak was the winner of NIST’s SHA-3 competition in 2012, but Ethereum’s team made a small tweak to the standard before launching in 2015. That tweak means Ethereum’s hashes are incompatible with official SHA3-256 implementations. It was intentional: to prevent cross-chain attacks where someone could reuse a transaction signature from one chain on another.

Keccak uses a ‘sponge construction,’ which absorbs input data and then squeezes out the output. This design makes it more resistant to length extension attacks than SHA-256. For Ethereum’s smart contracts, that’s critical. A flaw in hashing could let someone manipulate contract data. Keccak-256 is slower than SHA-256 on ASICs, but it’s efficient on GPUs. That’s why Ethereum originally relied on GPU mining and resisted ASICs for years.

After the Merge in 2022, Ethereum moved to proof-of-stake, so mining is gone. But Keccak-256 is still used everywhere else: for transaction hashing, block headers, and smart contract execution. The Ethereum Foundation now plans to switch to the official NIST SHA3-256 standard by 2025 to align with global cryptographic norms. That change won’t break anything-it’s a behind-the-scenes upgrade to improve standardization and long-term trust.

BLAKE2b: Speed for High-Throughput Networks

If you need speed, BLAKE2b is the algorithm to beat. Designed in 2012 by cryptographers including Jean-Philippe Aumasson, it’s faster than SHA-256 and even Keccak on modern CPUs. Benchmarks show it can hash data at over 1,200 MB/s on Intel Xeon processors-nearly twice as fast as SHA-256. That’s why Nano, a cryptocurrency focused on instant, feeless payments, uses BLAKE2b.

Nano’s block-lattice structure means every account has its own blockchain. Every transaction needs a quick hash to be verified. BLAKE2b makes this possible: Nano handles up to 7,000 transactions per second with under-one-second confirmations. Compare that to Bitcoin’s 4-7 transactions per second. BLAKE2b’s efficiency also means lower energy use. A 2023 study found BLAKE2-based networks consume only 0.05 kWh per 1,000 transactions. Bitcoin’s SHA-256 network uses 950 kWh for the same volume.

BLAKE2b is also ASIC-resistant by design. It’s not memory-hard, but it’s optimized for general-purpose CPUs. That means home users and small validators can still participate without expensive hardware. Developers love it too-libraries are well-documented, and implementation is straightforward. It’s not as widely adopted as SHA-256, but for new projects focused on speed and efficiency, BLAKE2b is becoming a top choice.

Scrypt and Equihash: Memory-Hard Algorithms

Scrypt and Equihash were built to fight ASIC dominance. The idea? Make mining require a lot of memory, not just raw processing power. Regular computers have plenty of RAM. ASICs don’t. So if a hash function needs 128MB or more of memory per calculation, ASIC manufacturers can’t easily build chips for it.

Litecoin, launched in 2011, was the first to use Scrypt. It required 32 times more memory than SHA-256. For a while, it worked. GPU miners could compete. But by 2018, Scrypt ASICs were everywhere. Litecoin’s ASIC resistance failed. Today, it’s just another SHA-256-style mining race, just with a different algorithm.

Equihash, created in 2016 and used by Zcash, was the next attempt. It requires 140MB of RAM per hash. That’s a lot for a phone, but manageable for a desktop. The theory was solid. But by late 2022, Innosilicon released the Z15 ASIC miner, capable of 1,500 sol/s. Zcash’s ASIC resistance collapsed. GPU mining became unprofitable. The lesson? Memory-hard doesn’t mean ASIC-proof. It just delays it.

Both algorithms are still in use, but their original goal-to keep mining decentralized-hasn’t held up. They’re now more about historical legacy than practical advantage. Newer projects avoid them unless they have a specific reason to use them.

Why Does It Matter Which Algorithm You Use?

Choosing a hash function isn’t just a technical decision. It shapes the entire economics of a cryptocurrency.

SHA-256 creates centralized mining. That’s good for security-large mining pools have strong incentives to keep the network honest. But it’s bad for decentralization. If a few companies control 80% of the hash power, the network becomes vulnerable to collusion or government pressure.

Memory-hard algorithms like Equihash tried to fix that. They failed. BLAKE2b and Keccak-256 offer a middle ground: they’re fast enough for high throughput but don’t create the same ASIC monopoly. That’s why newer chains like Solana and Avalanche use custom or optimized hashes that balance speed, security, and accessibility.

Security-wise, all the major algorithms-SHA-256, Keccak-256, BLAKE2b-are still considered secure. NIST and independent cryptographers confirm no practical collision attacks exist. But the future is changing. Quantum computing could break SHA-256 in 10-15 years. That’s why Ethereum is moving toward SHA3-256. And why NIST is already standardizing quantum-resistant algorithms like CRYSTALS-Kyber, even if they’re not hash functions yet.

For developers, the choice affects implementation. SHA-256 has the most libraries and documentation. RIPEMD-160 is harder to find. Keccak-256 has quirks in padding. BLAKE2b is clean and fast. If you’re building a new blockchain, your algorithm choice affects your developer onboarding, security audits, and long-term upgrade path.

What’s Next for Hash Algorithms in Crypto?

The future isn’t about replacing SHA-256 overnight. Bitcoin won’t change its hash function. It’s too entrenched. But new projects are already moving on.

By 2027, Gartner predicts 30% of new blockchains will use SHA-3 variants. That’s up from 12% in 2023. Why? Quantum resistance. Even if quantum computers aren’t here yet, the threat is real. Harvesting attacks-where attackers store encrypted data now to decrypt later-are already a concern.

Algorithm agility is becoming a key design principle. Projects like Cardano and Polkadot are building systems where the hash function can be upgraded without hard forks. That’s the real innovation: not picking the perfect hash today, but designing a network that can adapt tomorrow.

For now, SHA-256 still powers nearly half of the crypto market. But the tide is turning. The next generation of blockchains won’t just be faster or cheaper. They’ll be built on hash functions designed for a world where quantum computing, global regulation, and decentralized access all matter.