First off, let’s address the elephant in the room.
How come when I use my wallet software, I don’t have to download the entire Bitcoin blockchain? Well, we have SPV to thank for that.
SPV stands for Simple Payment Verification, and it’s a method for verifying if particular transactions (specifically your own transactions) are included in a block by only having to download the blockheaders of each block, instead of the entire block, which includes all the transactions.
This is particularly useful for clients that are constrained by storage capacity, as they can now operate without storing the full blockchain.
Imagine your typical Bitcoin smartphone wallet app.
You don’t have the entire blockchain stored.
Instead, you have a wallet, to keep track of your keys, and a network routing component that allows you to connect to the Bitcoin p2p protocol.
This is all done without a full blockchain, and for this reason, clients that run SPV are called lightweight or thin clients.
[SPV 2] In SPV, by having the block headers, you can simply run a merkle proof of inclusion, which we explained in the previous module in the tamper evident database section.
One major assumption you have to make when using SPV is that incoming block headers are not from a false chain.
If the block headers you receive are fake or invalid, then a transaction you see as valid may not actually be so, and someone could potentially double spend you! Thankfully, it’s generally ok to assume that incoming block headers are not from a false chain.
As long as you connect to many different nodes, then the probability of each one being controlled by one malicious entity is significantly lowered.
And as long as you’re connected to a variety of nodes, in the long term, the chain you see will be honest: a core assumption that we make in Bitcoin to begin with.
And realistically, we can’t afford to put the entire blockchain on our phones or other lightweight devices, so having a thin client running SPV is a pretty decent tradeoff.