SHA-256 is a member of the SHA-2 cryptographic hash functions designed by the NSA. SHA stands for Secure Hash Algorithm. Cryptographic hash functions are mathematical operations run on digital data; by comparing the computed “hash” (the output from execution of the algorithm) to a known and expected hash value, a person can determine the data’s integrity. A one-way hash can be generated from any piece of data, but the data cannot be generated from the hash.
SHA-256 is used in several different parts of the Bitcoin network:
Mining uses SHA-256 as the Proof of work algorithm.
SHA-256 is used in the creation of bitcoin addresses to improve security and privacy.