How Do ‘Simplified Payment Verification’ (SPV) Wallets Use Merkle Trees?
SPV wallets are lightweight wallets that do not download the entire blockchain. Instead, they only download the block headers.
To verify that a transaction is legitimate and included in a block, the SPV wallet requests a Merkle Proof from a full node. The Merkle Proof, along with the Merkle Root in the block header, allows the SPV wallet to cryptographically confirm the transaction's inclusion without needing the full transaction data.
Glossar
SPV
Architecture ⎊ Special Purpose Vehicles, within cryptocurrency, function as segregated entities designed to isolate risk and facilitate specific financial operations, often involving the issuance or management of tokenized assets.
Wallets
Custody ⎊ Wallets serve as the essential digital tool for managing the private keys that cryptographically prove ownership and control over cryptocurrencies, tokens, and tokenized financial derivatives.
Lightweight Wallets
Efficiency ⎊ Lightweight wallets, often employing Simplified Payment Verification (SPV), offer high operational efficiency by downloading only a small subset of the blockchain data, drastically reducing storage and synchronization time.
Payment
Settlement ⎊ Payment within cryptocurrency, options trading, and financial derivatives represents the actual transfer of value, typically digital assets or fiat currency, to fulfill contractual obligations arising from a trade or contract execution.