Block merging refers to the process of combining multiple transactions from different users into a single block before adding it to the blockchain. This approach enhances efficiency by reducing the amount of data that needs to be processed and stored.

When miners validate transactions, they can prioritize those with higher fees or combine lower-fee transactions, increasing overall transaction throughput. By merging blocks, the network can also lower the costs associated with maintaining decentralized ledgers, since fewer blocks mean less data to synchronize among nodes.

Block merging can contribute to improved scalability, allowing the network to handle a greater number of transactions without a significant increase in resource requirements. However, implementing block merging may also raise concerns about transaction prioritization and fairness, as users offering higher fees might receive quicker processing times.

Overall, block merging plays a crucial role in optimizing blockchain performance and ensuring that the network remains functional and accessible as usage grows.