What is a Merkle tree in Blockchain and how does it work?

Key takeaways:

• The Mark three is a type of binary hash tree that has 3 types of nodes: leaf nodes, non-leaf nodes, and root nodes.
• A Merkle tree is useful for verifying and maintaining transaction integrity in any decentralized ledger.
• The Merkle tree is seen in Bitcoin as well as Ethereum.

Introduction

Cryptocurrencies are no longer an unknown subject, and neither is blockchain, the technology behind their origin. For any crypto enthusiast, understanding blockchain structures and how they work is the first step to realizing the true nature of crypto.

While understanding different blockchain structures is where Merkle trees come in. Developed as a concept back in 1980 by Stanford University’s Ralph Merkle, Mark three is often used in peer-to-peer (P2P) networks to manage computing power and memory space requirements. It will not be an exaggeration to say that Merkle trees made blockchain technology a huge success. So let’s dive into the meaning behind the Merkle tree and how it works.

An overview of the Merkle tree

Simply put, a Merkle tree represents the way data is structured purposefully. It allows fast and efficient verification of a large amount of information on a blockchain. As mentioned earlier, Ralph Merkle unwittingly coined it as a concept in a paper titled “A Certified Digital Signature.” But no one expected it to become an important part of a decentralized ledger in the future.

The Merkle tree has improved the world of cryptography since its inception. But it became important to cryptocurrencies after Bitcoin’s mysterious creator used it in the basic code of BTC. After that, Ethereum and other cryptocurrencies also adopted Merkle trees.

In the case of the Bitcoin network, Merkle trees are an efficient component that uses hashes instead of the large information file for data verification. A Merkle tree uses unique descriptive terminology to describe the relationships between nodes and their levels.

Each individual block in the blockchain contains a series of transactions. Storing all these transactions and finding which particular transactions belong to which block can be frustratingly expensive tasks. In addition, it can negatively affect the efficiency of a blockchain. However, with Merkle trees, all transactions are efficiently ordered, resulting in the use of less data for verification and reduced CPU processing.

Understand how a Merkle tree works in a blockchain

Here is a simple example to clarify this concept:

Imagine a data block like the one shown above that has 4 transactions: L1, L2, L3 and L4. To store these transactions, we can implement the concept of a Merkle tree by calculating the hash of each transaction. After calculationwe receive Hash L1, Hash L2, Hash L3 and Hash L4.

These hashes for each transaction are stored in a node, usually called a leaf node, of the Merkle tree. But our work continues as we need to form non-leaf nodes by pairing leaf nodes. After calculation, we get Hash 0 and Hash 1, which are called parent nodes or non-leaf nodes of the hash of L1, L2, L3 and L4.

Finally, the hash of Hash 1 and Hash 2 is calculated by pairing them together, and we reach the root node, which is the Merkle root. Through this example, we understand that Merkle trees work by hashing child nodes repeatedly until a single hash remains in the structure.

This way, the Merkle tree tells you exactly if a transaction has affected the tree by only checking the root of the tree. The Merkle root is stored in the block header, making it tamper-proof and improving trust and integrity in a decentralized ledger. It is important to note that Merkle trees use a one-way hash function and will continue until this hash separates the proof of data from the data.

The necessity of Merkle trees for blockchain

Now that we have discussed what a Merkle tree is and how it works, the only thing left is to understand why it is important to the blockchain. The many advantages of a Merkle tree make it a necessity for blockchain technology and even crypto platforms. Some of these benefits are:

When it comes to the transmission, processing and crossing of data, delays are not allowed. This is why many blockchains use a Merkle tree to keep the network free from any kind of delay while transferring data. By reducing the amount of memory required to prove the integrity and validity of data, Merkle trees become an important part of the blockchain.

In the Bitcoin blockchain, which is a distributed P2P, there can be inconsistencies or even tampering with data because the same data exists on every computer connected to the P2P network. In this case, the Merkle tree makes it easy for miners to identify any kind of inconsistency or tampering with transactions.

Without the use of this concept, all data would have to be transmitted across the entire network, resulting in network slowdowns, reduced efficiency and unnecessary expenses. Such a scenario can be avoided using Merkle trees, which allow fast data verification with practical computing power and bandwidth.

Final thoughts

Merkle trees sound like a complicated concept, but they are a crucial component of blockchain technology and cryptocurrencies. Without the existence of this concept, there would be no trustless system used in Bitcoin, Ethereum and mining.

Frequently asked questions:

Q1. What were the Merkle trees designed to achieve?

The Merkle tree was designed as a process for verifying data to allow computers to work faster.

Q2. What is the connection between the Merkle tree and Ethereum?

The Merkle tree is a type of blockchain structure behind not only Ethereum, but also Bitcoin and the process of crypto mining. However, Ethereum uses a modified version of the Merkle tree, commonly known as the Merkle Patricia tree.

Q3. How to implement the Merkle tree

To implement Merkle trees, one must start with binary trees, where each non-leaf node is the hash of two child nodes. These leaves can either contain the data or the hash of the data.

Q4. What are some advantages of the Merkle tree?

By being a lightweight structure that increases the scalability of the blockchain, the Merkle tree can get rid of unnecessary data and thus improve efficiency. Both miners and users can benefit from the Merkle tree, as it verifies individual parts of blocks, checks transactions using hashes, and also calculates hashes while receiving transactions.