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Merkle Tree Meaning

Oct 20, 2023 | Updated Oct 20, 2023
A Merkle tree is a way of organizing data to make it more secure and efficient to process.

What is a Merkle Tree?

A Merkle tree, also known as a Hash tree, is a tree-like data structure named after Ralph Merkle, the computer scientist who introduced the concept in 1987. It organizes large sets of data efficiently by condensing the entire dataset into a single root hash or Merkle root. 

In the context of blockchain and cryptocurrency, Merkle trees ensure the integrity of information or transaction data within a block. They also provide a way of organizing transaction data that minimizes the consumption of computational resources such as processing power and storage spaces.

How Do Merkle Trees Work?

 Think of a Merkle tree like a family tree for computer files. Imagine you have a folder with four files: A, B, C, and D. To create a Merkle tree, you first create a unique code for each file. Then you combine the codes in pairs and create new codes until you have one code at the top—the “parent code.” It’s like mixing pairs of siblings’ photos, then photos of pairs, until you have just one photo of the whole family.

Now, if the integrity of file B is in question, a user needs B’s code and the parent code for verification. If anyone tries to modify even a tiny bit in B, its code would change, which would affect the codes above. This way, the tree makes sure that no file can be changed without getting noticed.

The parent code in Merkle trees is known as the Merkle root (root hash), despite being at the top of the structure. The unique codes are the hashes of the transactions or data blocks. The hashes at the base of the tree are the leaves (leaf nodes or transaction IDs) while the hashes in the middle are called branches or non-leaf nodes. 

The Merkle root is created by combining the hashes of individual transactions into a single hash from the bottom upwards. The root hash is then stored in the block header and used as the base for verifying whether it’s valid to include a particular block in the blockchain.

Technically, Merkle trees break down large data sets into smaller chunks. This allows nodes to verify a specific transaction without having to download the entire block or store a copy of it. It also reduces the blockchain’s size and improves its efficiency.

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