Crypto Guides

Understanding Merkle Tree & Its Importance In Blockchain


Merkle tree is the essential component of a blockchain. Data entered into the blockchain is immutable, and this is a critical future of blockchain. Even though there are many futures, many deploy blockchain for this one significant future. This future is primarily achieved using the concept of a Merkle tree. Before dwelling into further about the idea, it is essential to understand cryptographic hash functions.

What are cryptographic hash functions?

Cryptographic hash functions are another integral part of blockchain technology. Cryptography is often used for military purposes. In war zones, the data is shared between two parties of a country at different places using cryptography.

Cryptographic hash functions are algorithms that transform any input given to the algorithm in the output of fixed length. The outputs change drastically, even if a single letter of the input is changed. At the same time, the same input gives the same output all the time. It is highly unlikely to determine the output based on the input unless one has a set of public/private keys. Any length of the input gives a fixed-length output; this feature is handy when a large amount of data sets is used. To check any set of data is modified or not, we can check the fixed-length hash.

Let us see the usage of cryptographic hash functions in the bitcoin blockchain network. Blockchain is essentially a series of blocks of transactions joined together using cryptographic hash functions. Each block has header data and transactions associated with it. Header data contains the previous hash, nonce, Merkle root, block hash.

Data of the complete block, including the header data, is hashed, and this hash is stored in the present block and also in the next block as the previous block hash. This previous block hash represents the entire state of the blockchain at any given point of time. Hence if we make any changes to the transactions in the last block, the hash of all the blocks up to the present block will be disturbed, which is why it is highly impossible to change the transactions and hence the concept of immutability.

Now how do we verify the hashes to check the data integrity? It is highly inefficient and time consuming to check the hash of every block. Hence the concept of Merkle tree is used as it is efficient to check the data integrity.

What is a Merkle tree, and how is it used?

Merkle tree developed by Ralph Merkle is also called a Binary hash tree. It is a data structure used to store hashes of individual data in an extensive data set in a way to make the verification of the date set efficient.

An example of the Merkle tree is as below.

It would be easy to understand the Merkle tree with the example above. It is essentially a tree of hashes with branches of individual hashes. These hashes come from the transactions of the blockchain platform when it comes to a cryptocurrency platform.

In the above figure, we have transactions from TA  represents a transaction, while HA represents a hash of that transaction. All the transactions are hashed to produce a hash value of its own transaction. Then adjacent transactions are hashed together to form a hash of both transactions. Like HAB is the hash of transactions A and B. If there are an odd number of transactions, then the transaction is combined by its own, and a hash value is created. The same process is repeated until the last hash value is generated, which is called the Merkle root. In this case, HABCDEFGH is the Merkle root of transactions from TA to TH. This is how a Merkle tree is formed.

Hence because of the tree, it would easy to find if any transactions are tampered with, uses very few resources to check any fraudulent behavior, and easy to add new transactions to the block.

This allows for simple payment verification, and the new nodes need not download the entire blockchain but only the block headers of the longest chain. Thus Merkle trees help to maintain the immutability and integrity of the blockchain.

Crypto Guides

Understanding The Fundamentals Of Blockchain


We have understood the basics of DLT in the previous guide. In this article, let’s see one of the most popular applications of DLT, which is known as the blockchain. Many say that the blockchain technology is the new internet. By allowing information to be distributed not copied and tampered, blockchain did create the backbone of a new type of internet. Initially, blockchain found its application only in digital currencies, but today’s tech has now found other potential uses for the technology.

Blockchain, a distributed ledger, is a time-stamped series of immutable records of data that is controlled by different nodes in the network and not owned by any single entity. The records are stored in blocks that are secured and bound to each other by cryptographic principles.

The blockchain technology is completely decentralized. There is no central regulatory body on the blockchain network. The ledger on the blockchain is shared and immutable. The information in it is open to anyone to access. Hence, the blockchain is transparent in nature, and everyone involved in the network is accountable for their actions.

How does the Blockchain function?

In a blockchain, information is passed from one source to another in a fully automated and secure manner. When a party makes a transaction via blockchain, the peers in the network create a block for this transaction, which is secured using cryptography. This block is verified by several nodes (computers) distributed across the network. Once the block is successfully verified, it is added to the chain. Each block in the chain has a unique record with a unique history. Falsifying a single record means to falsify millions of instances in the chain. This is virtually impossible.

Features that hold Blockchain Strong

There are three properties of blockchain technology, which have helped it gain widespread applause.

  • Decentralization
  • Transparency
  • Immutability

📌 Decentralization

Before the appearance of Bitcoin, the public was used to only the centralized systems. And the idea of centralized systems was simple. There is a centralized entity that stores user’s information. To get this information, the user must interact solely with this entity. The main drawback of centralized systems is the absence of transparency.

Imagine if the centralized system was taken out. Everyone in the network can now view the data. It simply eliminates the existence of a third party. The data now can be shared one to one without any intermediary. This will eradicate the costs to be paid to the intermediaries as well. And this system is referred to as a decentralized network, making it a great property of the blockchain.

📌 Transparency

Transparency is another property that makes blockchain much appealing. Some say that blockchain is transparent, while some say it is private. Though it may sound counter-productive, blockchain is both transparent and private. When a transaction is made between two parties, one cannot see ‘who’ has sent it to ‘whom.’ Instead, we will be able to see something called the hash of a transaction. And this will be visible to everyone. Hence, this brings both transparency and privacy in the blockchain.

📌 Immutability

The blocks in the blockchain are immutable. It is impossible to tamper with. Technically speaking, blockchain is a linked list whose structure contains data and a hash pointer to the next block, hence creating a chain. This chain makes blockchain immutable.

For instance, let’s say a hacker hacks block 3 in the chain and tries to change the data. But, a slight change in the block will affect the other blocks drastically. That is, a change in block 3 will change the hash stored in block 2. This continues up to block 1. This will change the entire blockchain, which is impossible. Hence, making blockchain immutable.

Above are just the primary properties of the blockchain. There are other beneficial properties too, which is the reason blockchain has still sustained and is developing at a rapid pace.

Crypto Guides

The Evolution & Properties Of Cryptocurrency!


We could say that the type of currencies we use today is employed as a medium of exchange for goods and services. In the olden days, transactions used to happen in the barter system. Barter system implies that goods are exchanged for goods. With this system, it took time to trade products and services as it is challenging to find people to accept their goods for the goods they want. Hence came the era of coins in gold or some other metal with a denomination printed on it. As some standard is associated with it, the trading of goods and services has become easy. Then came the paper notes making it easy to carry large amounts of cash, which was not possible with coins. We are this point where these paper notes are known as currencies. Each country has its respective currency (The US Dollar, Japanese Yen, Indian Rupee, etc.)

Evolution Of Cryptocurrency

Even though the purpose of the money didn’t change much, the way we use it kept changing throughout history. Banks came into existence to ease out the financial transactions. They played a significant role in global trade in terms of transferring money across different countries, thus improving the economy of each country. Physically minted cash would be less than 10% of the entire currency in the world. Remaining exists in the form of virtual currency as electronic money in online accounts. Central banks in each country control these accounts. Since power is vested within these financial institutions, the entire banking process is centralized. Hence the necessity of an alternative currency has emerged. These are termed as cryptocurrencies, and the primary purpose of their invention is to create a decentralized currency system where the entire network is not controlled by anyone at all.

What Are Cryptocurrencies?

Cryptocurrencies are digital or virtual currencies where cryptographic techniques are used to generate the units of currency and monitor the transfer of funds without a central bank. Thus, making it a decentralized way of producing and using money.

Cryptocurrencies are generated by using a blockchain platform that uses distributed ledger technology. The first-ever cryptocurrency that has come into existence is The Bitcoin in 2009, though the white paper related to this concept was released in October of 2008. Thus, 2009 signals the beginning of the era of cryptocurrency. There has been no looking back since then.

Properties Of Cryptocurrency

The three fundamental features of cryptocurrencies are Trustlessness, Immutability, and Decentralization. Let us understand these properties using the example of Bitcoin.


Though the word trustless creates confusion to the readers, it merely means there is no need not trust anyone or anything to send or accept a cryptocurrency. If we say an environment is trustless, that means there is no need for you to trust anyone in the network. The Bitcoin network is a trustless environment. There was no currency before Bitcoin that was not monitored by a central bank. Every node in the blockchain network has a copy of the ledger; thus, there is no need to trust any authority.


Immutability means that it cannot be undone. It is highly improbable to rewrite the history of the transactions in Bitcoin blockchain. Since all the transactions are recorded in the blockchain, the cryptographic techniques make it highly impossible to change any transactions. If any fraudulent transactions happen in the case of our bank accounts, the banks have the authority to change the transaction. But in the case of cryptocurrency, it is not possible. Thus, removing the concept of centralization and trust from these digital currencies.


It is the keyword when it comes to cryptocurrencies. Decentralization offers different types of tolerances. Tolerance concerning the infrastructure, component failures, hacking, and collusions. In the Bitcoin network, the ledger where the transactions are recorded is distributed among every node in the network. Any component failures don’t cause any problem to the functioning of the network. Hacking the blockchain is extremely difficult and a costly process. When it comes to traditional banking, individual entities can collide with each other to make profits at the expense of loss to others. This plot is not possible in the case of a cryptocurrency network, thus offering tolerance to collusion. Apart from all of these, there are many more advantages of a decentralized system over a centralized banking network.

Bottom Line

Therefore, Cryptocurrencies offer plenty of opportunities in today’s digital world, which traditional currency couldn’t provide. We will be further discussing the purpose of cryptocurrency and more properties of cryptocurrency in our upcoming articles. Stay Tuned. Cheers!