A cryptographic system, patented by Ralph Merkle from Stanford University in 1982, for providing digital signatures from multiple sources in an efficient way.
One time signatures, as embodied in the Diffie-Hellman algorithm are practical between a single pair of users who are willing to exchange a large amount of data necessary but they are not practical for most applications without further refinements.
The method is a “tree authentication” system, also called "binary hash tree," where the computation of the root forms a binary tree of recursive calls. Authenticating a particular leaf in the tree requires only those values starting from the leaf and progressing to the root.
A Merkle tree serves to encode blockchain data more efficiently and securely. The data structure is useful because it allows a client to verify a specific transaction without downloading the entire blockchain, only the relevant branch of the tree.