Blockchain is an emerging innovative technology which is making a tremendous impact on many software development companies. It has great benefits most importantly the security feature. That’s why it has impelled many blockchain development companies to adopt the technology for building smart contracts. In this blog, let us understand the importance of the Merkle tree in Blockchain in detail.
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As explained (Blockchain council, 2017), Merkle tree is a very important concept in cryptography that helps in data verification of large data securely and efficiently. In view of Blockchain consulting companies, a Merkle tree is the summary of all transactions in a block and is a digital fingerprint of the entire set of transactions. Thus, any user can verify whether a transaction is included in a Block or not. Merkle tree is also referred as binary hash tree.
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Merkle tree is created by repeatedly hashing pairs of nodes until there is only one hash left. This last hash is called the Root Hash or the Merkle Hash. Merkle tree is constructed from the bottom up from hashes of individual transactions. (Hackernoon, 2017)
How do Merkle tree relate to Blockchain?
We know that Blockchain has blocks linked to each other logically. Each block would have thousands of transaction details. Therefore, it would be a complex task to store all of them as a series which is also very time inefficient. In such a series of data, it becomes really cumbersome to find out a particular transaction. This is where the Merkle tree comes into the action. Using a Merkle tree, we can easily identify if that particular transaction belongs to a block or not. It is much faster and greatly cuts down the time.
Let us understand this with a simple example. Suppose we have the following Merkle tree.
Now let us assume that we are in a purpose of finding a particular transaction belonging to a block or not.
Rather than moving through each and every individual block transactions and inspecting the hash, we just need to track it down through hash trials.
It eventually reduces a huge amount of time in the process. A block header plays a significant role in the Bitcoin. The reason is it connects all blocks together.
Generally, a block header is divided into six fields. The version number, the hash of the last block, the Merkle root, Time, Target, Nonce.
The following three factors play a vital role in the process:
Time: It is the timestamp in the block that would show the time in seconds.
Target: It is the Threshold under which the block hash exists.
The Nonce:In the cryptographic communication, the nonce is an arbitrary number that is used only once in it.
Remember that the block header gets incrementally changed in the block while mining so that we get a special hash.
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Uses of Merkle tree:
Merkle tree separates the validation of the data from data itself hence by significantly reducing the amount of data that a trusted authority has to maintain for verification Purposes. It can reside locally, on a distributed system.
Merkle tree has many so other benefits too:
- They require little disk space or little memory as the proof which is computationally easy and fast.
- Their ability to prove that a log is complete and consistent is essential to blockchain technology and have a general ledger concept.
- Merkle tree benefits miners and users of the blockchain by receiving transactions from peers.
- They provide a way to validate and verify the data.
Merkle trees are the crux component of Blockchains and effectively allow them to function with immutability and transaction integrity. The role that they play in distributed networks is crucial to grasp within cryptocurrencies, as they are more complex systems as viewed by many blockchain companies.