A hashing algorithm is a mathematical algorithm used to transform data into a fixed-length value called a hash. In mining, the network defines which algorithm miners must use to calculate hashes.
Different algorithms have different characteristics and computational requirements. As a result, some algorithms may be better suited to specific types of hardware, such as ASICs, GPUs, or CPUs.
For example, Bitcoin uses SHA-256. SHA-256 produces a 256-bit hash, which is normally represented as 64 hexadecimal characters. Hexadecimal is a number system that uses 16 symbols: the numbers 0–9 and the letters a–f.
A fundamental property of cryptographic hash functions is that even a tiny change in the input produces a completely different output. This makes hashes useful for detecting changes in data and helps protect the integrity of blockchain data.
Mining algorithms can therefore have a major impact on how a cryptocurrency is mined, including which hardware is most effective and how much computational power can be achieved.