There is a difference between the appearance of entropy and the reality of it. Something encrypted is most definitely not random. It is made to appear random. But that is not the same as being random.
Fortunately, nothing in bitcoin is encrypted. Furthermore, hashes are not "random" they are entirely deterministic. Every time I perform SHA-256 against the words "no-ice-please is spouting off words without taking the time to understand the processes that he is attempting to discuss", I will ALWAYS get the result: bf403c0c12e1f27f5bd372b4724a2a41bbc2360a02c52ead40b4c7b4b66e6d11. There is nothing random about it. However, you aren't going to find a pattern in the SHA-256 inputs and outputs that will allow you to look at the hash: 1e39dffd07a1690be370193a7c03ae6e494f2adb98a8391c83c4920a5951f857 and figure out exactly what text I started with. It is deterministic, but it isn't reversible.
Someone mentioned that md5 has weaknesses.
Certainly.
Is that an ancient cryptographic system, untrusted in recent years?
Well that's a ridiculously non-specific question.
Ancient? Like hundreds of years old? No.
Untrusted? That depends on the person doing the trusting and the purpose that it's being used for.
Recent? Like within the past few hours? Sure.
So in 2012 Microsoft was using a flawed cryptographic system,
Microsoft does a lot of stupid things. I don't understand the point you're trying to make.
and each of the people on this thread who defend sha256 probably would have defended md5.
I'd still defend MD5 as being perfectly suitable for some purposes. MD5 (and SHA-1, and SHA-2, and RIPEMD-160) is just a tool. When used properly, it can serve a purpose. When used improperly, it will result in problems.
Note that MD5 didn't go from "very secure" to "completely useless" in a matter of hours (or days, or weeks). There were incremental advancements on finding weaknesses in the algorithm building on those weaknesses. There was a significant amount of time between when the first weakness was identified and when it was possible to forge a certificate. Those aware of advancements in cryptography (the same types of people that contribute to the bitcoin protocol) would have been aware of the early discoveries and would have had plenty of time to adopt newer algorithms as needed.
Anyway, hypothetically, if a credible flaw were found in sha then the effect would be to help scrypt coins.
Perhaps. Or perhaps the effect would be to increase the mining difficulty in bitcoin and work towards replacing SHA-2 in the generation of bitcoin addresses.
Note that if it was possible today to calculate an ECDSA 256 bit public key from its SHA-256 hash in a fraction of a second, bitcoin would still be perfectly secure. The public key is broadcast EVERY time you spend your bitcoins. Knowing it isn't going to help you steal someone's bitcoins.