What exactly is the “Merkle tree” often mentioned in exchange proof of reserves?
Here’s how I understand it: when a block contains thousands of transactions, proving that one transaction is included takes only a dozen or so hashes—you don’t need to download all the transactions. This is crucial for light wallets.
If any transaction in a block is changed, its hash changes, and that change propagates all the way up to the Merkle root. The block hash changes too.
The header of every $BTC block records a Merkle root that summarizes all the transactions in that block.
Here’s how I understand it: when a block contains thousands of transactions, proving that one transaction is included takes only a dozen or so hashes—you don’t need to download all the transactions. This is crucial for light wallets.
If any transaction in a block is changed, its hash changes, and that change propagates all the way up to the Merkle root. The block hash changes too.
The header of every $BTC block records a Merkle root that summarizes all the transactions in that block.
