
I may be missing something, but it is not clear to me if you want cryptographic security. If you do, then the only safe choice is to use a standard algorithm (or block cipher construction, perhaps). Sorry if that's already what you are discussing - I don't know whether there are any established algorithms that mix in a byte at a time. (though the argument that they are aiming for avalanche properties is pretty strong). (The history of the submissions to the SHA3 contest http://csrc.nist.gov/groups/ST/hash/sha-3/index.html shows it's not easy for even the experts to get it right, and that it can take a long time for problems to be noticed, even if you can convince tons of other experts to look over an algorithm) If you don't want cryptographic security, there may are probably cheap things you could consider. Brandon