The shift has almost started; nowadays, finance is moving onto the blockchain, in that way leveraging the decentralization, as disintermediation benefits of the architecture of the technology. Assets of different types were moved to the blockchain, in that way creating a more efficient, as well as economical system for the transfer of value, and management of fractional ownership. This migration is act is not just disrupting the existing financial system, but it is also democratizing access to growth capital all over the world. These days, the security for much of the blockchain community relies on an outdated hash algorithm standard (SHA-2), which is one not best suited to the needs of the demanding financial markets. Existing chains are going to need to upgrade eventually to what the team has determined to the best-in-class cryptographic hash function, SHA-3, but new blockchain should also implement it now.
These are actually the very early days of putting securities on the blockchain. As the leaders in crypto-securities, as well as blockchain technologies for the capital markets, people have to be thoughtful how they facilitate this transfer of assets; they also must ensure that they are operating in such a way which lays the groundwork for long-term security, as well as sets a standard for industry best practices. Implementing the best in class cryptographic hash function, such as the Secure Hash Algorithm-3 (SHA-3), serves this mission.
The function of the hash
Blockchain technology distributes the data management industry. Peer-to-peer networks promoted the utilizing of cryptography, in that way creating a growing demand in data security, as well as transparency solutions.
A cryptographic hash function is defined as an algorithm that employs mathematics so that it will make an individual digital fingerprint of alphanumeric characters of a fixed size, which is given an input document of the unknown quantity. It actually makes the task of comparing the authenticity of a material with a very original simple: Instead of the need to read both documents in detail, you can compare the much smaller digital fingerprint which is produced by the hash function.
Hash functions are also helpful in securing transaction data by generating a unique digital fingerprint for each transaction, in peer-to-peer networks. Transaction hashes are organized into a Merkle tree, or also known as the hash tree, to help validate the authenticity, as well as the relationship of each transaction stored on the blockchain.
The SHA-3 hash function is also utilized at the block level to generate a proof-of-work challenge which actually becomes the target for miners that seek to create the next block on the blockchain. This challenge is an integral part of how the network maintains its integrity, as well as how it reaches a decentralized consensus. Then, cryptocurrency is awarded to the one miner who was the most successful in calculating the SHA-3 hash which matches the requirements specified in the proof-of-work challenge.
Within traditional finance, there remains the concern about corporate, as well as the enterprise application, even though the blockchain technology is a clear way forward for industry early adopters. Serving such needs, and in that way bringing the blockchain solution to the mainstream, it is going to depend on how blockchains are architected, to protect client data from network interference or manipulation. The right hash function can determine enterprise-level operability, being an essential component of the architecture.
Securing the capital markets with SHA-3
As a hash standard which provides certified security over the private keys of the users, as well as high speed, hardware-based encryption, the SHA-3 best suits the needs of the capital markets of the future. SHA-3 contains the right characteristics which are needed to install confidence in a peer-to-peer network which is not based on centralized intermediaries for authority or governance.
Unlike the hash function that Bitcoin has, as well as some other blockchains based on SHA 256, SHA-3 was developed by community collaboration via the National Institute of Standards and Technology (NIST), forcing some different types of perspectives, as well as various issues to be addressed. It actually means that the hash function had to endure public scrutiny, as well as exhaustive testing so it would be considered the hashing standard, which it has now become. NIST released SHA-3 in the year 2015, being its standard for securing the integrity of electronic information.
Being a subset of Keccak, SHA-3 cryptography has been built on sponge constructions, which is a particular method of absorbing data in and then squeezing it out. Unlike other different cryptographic hash functions, the sponge constructions permit for the input, as well as the output of any amount of data, extending the output function and making for greater flexibility use.
One outdated concern that weighed against SHA-3 was the slower hashing speed than its predecessors. This can be considered fair, but only with regards to software. When it comes to hardware, SHA-3 easily outpaces SHA-1 and SHA-2, and hashing is increasingly happening within hardware components. The third in a series, SHA-3 is significantly different from its first, as well as from its second iterations which share some of the same math and cryptographic structure (MD5).
Building a better blockchain
We have the chance to take what we have learned from the most prominent blockchains of today and create an iteration of the technology which leverages what works, as well as what meets our business needs for capital markets.
Building a new, as well as a dedicated cryptosecurity blockchain will permit for customization and transparency which can better serve the needs that the future requires. SHA-3 is best suited to industrial use with a hashrate, which is an order of magnitude higher than SHA-2, following the Federal Information Processing Standard (FIPS), as the team of Keccak pointed out.
SHA-3 generally best serves the needs of the capital markets.
BUIDL > HODL
The blockchain industry as a whole, which is still nascent in its expansion, shows some signs of its maturity.
The continued volatility in the valuation of cryptocurrencies has been proven to be too much for people that are looking for some quick crypto profits. Token price does not faze those that “hodl” with a vision to build better tools, as well as networks for a better future. While volatility was helped to reduce some of the hysteria around cryptocurrency, there is a growing community looking for some greater sophistication from industry participants. “Buidl,” which is a direct homage to “hodl,” is a movement that focuses on development over cryptocurrencies. It also encourages teams to examine how blockchain technology can be the best support which needs societal change vsus quick, as well as frivolous application. Thoughtful infrastructure is considered the way forward.
And when it comes to capital markets, it does not have to be a race to move assets onto the blockchain, but instead a strategic process which makes it easy for some new market participants to access growth capital and for existing participants to leverage all of the benefits of distributed ledger technology. What serves the mission and empowers trust in a trustless system – is employing the best-in-class cryptographic hash function.