Merkle Trees in Bitcoin: A Practical Guide with TypeScript Implementation

Merkle trees are a fundamental data structure in the Bitcoin blockchain that ensures transaction integrity by efficiently summarizing and verifying large sets of data. A Merkle tree is a hash-based data structure where individual transaction hashes are repeatedly paired and hashed until a single Merkle root remains, ensuring that any alteration to a transaction invalidates the entire tree. This allows Bitcoin nodes to verify transactions without storing the entire blockchain, improving security and performance. The implementation of Merkle trees in Bitcoin involves computing the Merkle root of a tree by recursively combining pairs of nodes, with each non-leaf node being the hash of its two children. The getMerkleRoot function calculates the Merkle root of a tree by taking an array of nodes and a function that specifies how to combine two nodes into their parent node by hashing them together. The toBitcoinMerkleNode function implements Bitcoin's specific method for computing parent nodes in the Merkle tree, which involves reversing each hash, concatenating them, applying SHA-256 twice, and finally reversing the result back. This process matches Bitcoin's internal hashing convention, ensuring that the computed Merkle root will match the blockchain's value. Merkle proofs are used to verify that a single transaction truly belongs in a Merkle tree, providing just enough intermediate hashes to trace a path from the specific transaction to the Merkle root. The getMerkleProof function generates a Merkle proof for a specific transaction by collecting the necessary sibling hashes along the path from the leaf to the root. The verifyMerkleProof function verifies that a transaction is indeed part of the block by reconstructing the path to the Merkle root using only the proof hashes. This process effectively "climbs" the Merkle tree from the transaction to the root, using only log₂(n) hashes instead of the full set of transactions. In conclusion, Merkle trees are a crucial component of the Bitcoin blockchain, enabling efficient verification of transaction history and ensuring the integrity of the blockchain. The implementation of Merkle trees in Bitcoin demonstrates how this elegant data structure enables secure and efficient verification of transactions, making it a cornerstone of blockchain technology.