What is a Merkle Tree and how does it work in a blockchain?

A Merkle Tree is a data structure that organizes all the transactions in a block into a single compact fingerprint called the root hash, which is stored in the block header. Each transaction is converted into a short code (a hash); those hashes are then paired and hashed together into inner nodes, and that process repeats up the tree until only one hash remains at the top — the Merkle root. This structure enables efficient verification of transaction integrity and inclusion within the block, meaning a wallet or light client can confirm a specific transaction exists without downloading every transaction in the block. For a beginner, the practical payoff is trust without bulk: you can verify your transaction is real and unaltered by checking just a small chain of hashes rather than the entire block.