Merkle Tree in Blockchain: Working, Examples, & Advantages

The Merkle Tree helps maintain the consistency and integrity of the blockchain while minimizing the amount of data that needs to be transmitted and verified. Through this blog, you will dig into the concepts of the Merkle Tree, along with its example, working, and real-life use cases.

Let us discuss the following topics:

• What is Merkle Tree in Blockchain?
• Why Do We Need Merkle Tree in Blockchain?
• How Does Merkle Tree Work?
• Advantages of Merkle Tree
• Applications of Merkle Tree in Blockchain
• Summing Up
• FAQs

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What is Merkle Tree in Blockchain?

A Merkle Tree in Blockchain, also known as a hash tree, is like a family tree for computer data. Its main job is to quickly check if information is genuine and hasn’t been changed, especially when sending or saving data.

Merkle Tree comes under the tree data structure in which every leaf node is assigned a data block hash (a special or unique identification number that is given to each block on the blockchain), and a non-leaf node is assigned the cryptographic hash labels (a one-way function having a fixed length input and generating a unique fixed length output) of its child nodes. 

The Merkle Tree in Blockchain is further divided into three parts, i.e., Merkle root, non-leaf nodes, and leaf nodes, which are represented in the below image:

Understanding the Concept of Merkle Root

A Merkle root is a topmost node or hash in the tree structure, which represents a simple mathematical way to verify the data on the Merkle Tree. Their main role is to ensure that data blocks passed through a peer-to-peer network are unaltered, undamaged, and complete.

The Merkle root itself is a hash value (a unique identification value that is provided to Merkle root after the concatenation of hash values provided to non-leaf nodes) that is derived from the hash values of the individual data elements (often called leaves) in the Merkle Tree. It serves as a compact and secure representation of a large dataset, commonly used in blockchain technology for efficient and verifiable storage of transaction data.

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Why Do We Need Merkle Tree in Blockchain?

Let us understand the need for a Merkle Tree in blockchain with the help of a suitable example.

Imagine you have a collection of pictures, and you want to make sure none of them get altered. Instead of checking each photo individually, a Merkle Tree lets you create a summary, kind of like a special fingerprint, for all the pictures combined.

This fingerprint, or Merkle root, is like the boss at the top of the tree structure. It’s made by combining the fingerprints of smaller groups of pictures. If someone changes even one picture, the boss’s fingerprint at the top will change.

In computer systems, like blockchains, this is quite helpful. People don’t need to check all the pictures one by one; they can just look at the boss’s fingerprint. This is especially useful when many people are involved and you want to ensure everything is secure and correct without a huge hassle.

Other valid points that show the necessity of Merkle Tree in blockchain are as follows:

• If we use the Merkle Tree during the Bitcoin or Ethereum transaction, each node on the Bitcoin network would have to hold a complete record of all the Bitcoin transactions made.
• Suppose we don’t have to use the Merkle Tree in blockchain, then an authentication query on Bitcoin would require a vast amount of data to be sent over the computer network, and as a result, you have to verify the data manually.

How Does Merkle Tree Work?

Merkle Trees function by organizing a collection of data elements into a binary tree structure, using cryptographic hash functions to generate hash values at each level of the tree. Initially, individual data elements, often transactions in the domain of a blockchain, undergo hashing to produce leaf nodes. 

Also, adjacent pairs of these hash values are concatenated and hashed together, forming new nodes in a higher layer of the tree. This process iterates until a single hash, known as the Merkle root, remains at the top of the tree. Here is an example that shows how Merkle Trees work in blockchain:

Imagine you have four transactions you want to include in a block on a blockchain:

• Transaction A
• Transaction B
• Transaction C
• Transaction D

First, each transaction is hashed:

• Hash A: Hash (Transaction A)
• Hash B: Hash (Transaction B)
• Hash C: Hash (Transaction C)
• Hash D: Hash (Transaction D)

These hashes become the leaves of the Merkle Tree in Blockchain. Next, these hashes are paired and concatenated, then hashed together to form the parent nodes, as follows:

• Hash AB: Hash (Hash A + Hash B)
• Hash CD: Hash (Hash C + Hash D)

Finally, the hashes of these parent nodes are concatenated and hashed to form the Merkle root:

• Merkle Root: Hash (Hash AB + Hash CD)

This Merkle root represents all the transactions beneath it.

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Advantages of Merkle Tree

There are various benefits to using the Merkle Tree in blockchain. Let us see the most important advantages it offers in this domain:

• Merkle Tree in Blockchain helps in maintaining the integrity and consistency of data.
• It assists in saving time and effort by directly looking at the Merkle root if any alteration happens through this intrusion.
• This tree structure helps in saving memory or disk space.
• Merkle Tree in Blockchain can be easily broken into small chunks for data verification.
• Merkle Trees can be used to create checkpoints in data, where the root hash at a certain point in time ensures the integrity of the entire data set up to that point.

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Applications of Merkle Tree in Blockchain

In the above section, we have seen the advantages of the Merkle Tree. Let us take a glimpse at some of the use cases it offers:

• Saving Internet Traffic: When you use your computer to check transactions, Merkle Trees help you use less internet. You only need to download a small part of the list, not everything, to ensure everything is okay.
• Making Blockchain Transactions Safer: Merkle Trees help keep blockchains safe. If someone tries to change something in the transaction data, it’s like trying to repaint a security camera. It won’t work because the Merkle Tree in Blockchain quickly spots any changes.
• Lightweight Clients: Lightweight clients, such as those in SPV (Simplified Payment Verification) wallets, use Merkle Trees to verify transactions without downloading the entire blockchain. These clients only need a subset of Merkle Tree nodes to validate the inclusion of a transaction in a block.

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Summing Up

Merkle Trees in Blockchain play a pivotal role in shaping the security and scalability of decentralized systems, offering innovative solutions for the challenges that lie ahead. Their continued evolution and integration into novel frameworks hold the key to unlocking even greater potential for secure, transparent, and efficient data management in the digital age.

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