diff --git a/blocks/block.go b/blocks/block.go
index bcb5d6d6a..77d636d89 100644
--- a/blocks/block.go
+++ b/blocks/block.go
@@ -47,7 +47,7 @@ func (b *Block) ValidateBasic(lastBlockHeight uint32, lastBlockHash []byte) erro
 	if b.Header.Network != Config.Network {
 		return ErrBlockInvalidNetwork
 	}
-	if b.Header.Height != lastBlockHeight {
+	if b.Header.Height != lastBlockHeight+1 {
 		return ErrBlockInvalidBlockHeight
 	}
 	if !bytes.Equal(b.Header.LastBlockHash, lastBlockHash) {
diff --git a/config/config.go b/config/config.go
index c7a3e4982..7d2613313 100644
--- a/config/config.go
+++ b/config/config.go
@@ -19,13 +19,13 @@ import (
 var RootDir string
 var Config Config_
 
-func initFlags(printHelp *bool) {
+func setFlags(printHelp *bool) {
 	flag.BoolVar(printHelp, "help", false, "Print this help message.")
 	flag.StringVar(&Config.LAddr, "laddr", Config.LAddr, "Listen address. (0.0.0.0:0 means any interface, any port)")
 	flag.StringVar(&Config.Seed, "seed", Config.Seed, "Address of seed node")
 }
 
-func init() {
+func ParseFlags() {
 	RootDir = os.Getenv("TMROOT")
 	if RootDir == "" {
 		RootDir = os.Getenv("HOME") + "/.tendermint"
@@ -54,7 +54,7 @@ func init() {
 
 	// try to parse arg flags, which can override file configuration.
 	var printHelp bool
-	initFlags(&printHelp)
+	setFlags(&printHelp)
 	flag.Parse()
 	if printHelp {
 		fmt.Println("----------------------------------")
diff --git a/consensus/state.go b/consensus/state.go
index 73d8a699e..042fa283a 100644
--- a/consensus/state.go
+++ b/consensus/state.go
@@ -418,7 +418,7 @@ func (cs *ConsensusState) stageBlock(block *Block) error {
 	stateCopy := cs.state.Copy() // Deep copy the state before staging.
 
 	// Commit block onto the copied state.
-	err := stateCopy.CommitBlock(block)
+	err := stateCopy.AppendBlock(block)
 	if err != nil {
 		return err
 	} else {
diff --git a/log.go b/log.go
index 9f04a5083..25e1d1107 100644
--- a/log.go
+++ b/log.go
@@ -8,6 +8,7 @@ import (
 	"github.com/tendermint/tendermint/consensus"
 	"github.com/tendermint/tendermint/mempool"
 	"github.com/tendermint/tendermint/p2p"
+	"github.com/tendermint/tendermint/state"
 )
 
 var log = logging.MustGetLogger("main")
@@ -31,6 +32,7 @@ func init() {
 
 	blocks.SetBlocksLogger(log)
 	consensus.SetConsensusLogger(log)
-	p2p.SetP2PLogger(log)
 	mempool.SetMempoolLogger(log)
+	p2p.SetP2PLogger(log)
+	state.SetStateLogger(log)
 }
diff --git a/main.go b/main.go
index d3a5d775a..9e3ffc8fc 100644
--- a/main.go
+++ b/main.go
@@ -78,6 +78,9 @@ func (n *Node) inboundConnectionRoutine(l p2p.Listener) {
 
 func main() {
 
+	// Parse config flags
+	config.ParseFlags()
+
 	// Create & start node
 	n := NewNode()
 	l := p2p.NewDefaultListener("tcp", config.Config.LAddr)
diff --git a/mempool/mempool.go b/mempool/mempool.go
index 6d74a222a..b721cde21 100644
--- a/mempool/mempool.go
+++ b/mempool/mempool.go
@@ -34,7 +34,7 @@ func NewMempool(lastBlock *Block, state *State) *Mempool {
 func (mem *Mempool) AddTx(tx Tx) (err error) {
 	mem.mtx.Lock()
 	defer mem.mtx.Unlock()
-	err = mem.state.CommitTx(tx)
+	err = mem.state.ExecTx(tx)
 	if err != nil {
 		return err
 	} else {
@@ -82,7 +82,7 @@ func (mem *Mempool) ResetForBlockAndState(block *Block, state *State) {
 	// Next, filter all txs that aren't valid given new state.
 	validTxs := []Tx{}
 	for _, tx := range txs {
-		err := mem.state.CommitTx(tx)
+		err := mem.state.ExecTx(tx)
 		if err != nil {
 			validTxs = append(validTxs, tx)
 		} else {
diff --git a/merkle/util.go b/merkle/util.go
index 44e1fedd2..56f808e2c 100644
--- a/merkle/util.go
+++ b/merkle/util.go
@@ -42,7 +42,7 @@ will be at different levels.
 func HashFromHashes(hashes [][]byte) []byte {
 	switch len(hashes) {
 	case 0:
-		panic("Cannot compute hash of empty slice")
+		return nil
 	case 1:
 		return hashes[0]
 	default:
diff --git a/state/log.go b/state/log.go
new file mode 100644
index 000000000..323af2627
--- /dev/null
+++ b/state/log.go
@@ -0,0 +1,15 @@
+package state
+
+import (
+	"github.com/op/go-logging"
+)
+
+var log = logging.MustGetLogger("state")
+
+func init() {
+	logging.SetFormatter(logging.MustStringFormatter("[%{level:.1s}] %{message}"))
+}
+
+func SetStatesLogger(l *logging.Logger) {
+	log = l
+}
diff --git a/state/state.go b/state/state.go
index 182ab84ad..9428dd649 100644
--- a/state/state.go
+++ b/state/state.go
@@ -13,7 +13,9 @@ import (
 )
 
 var (
-	ErrStateInvalidSequenceNumber = errors.New("Error State invalid sequence number")
+	ErrStateInvalidSequenceNumber      = errors.New("Error State invalid sequence number")
+	ErrStateInvalidValidationStateHash = errors.New("Error State invalid ValidationStateHash")
+	ErrStateInvalidAccountStateHash    = errors.New("Error State invalid AccountStateHash")
 
 	stateKey = []byte("stateKey")
 )
@@ -33,6 +35,7 @@ func (abc accountBalanceCodec) Read(accBalBytes []byte) (interface{}, error) {
 
 //-----------------------------------------------------------------------------
 
+// TODO: make it unsafe, remove mtx, and export fields?
 type State struct {
 	mtx             sync.Mutex
 	db              DB
@@ -175,7 +178,17 @@ func (s *State) AppendBlock(b *Block) error {
 		}
 	}
 
+	// Increment validator AccumPowers
 	s.validators.IncrementAccum()
+
+	// State hashes should match
+	if !bytes.Equal(s.validators.Hash(), b.ValidationStateHash) {
+		return ErrStateInvalidValidationStateHash
+	}
+	if !bytes.Equal(s.accountBalances.Tree.Hash(), b.AccountStateHash) {
+		return ErrStateInvalidAccountStateHash
+	}
+
 	s.height = b.Height
 	s.blockHash = b.Hash()
 	return nil
@@ -193,13 +206,20 @@ func (s *State) CommitTime() time.Time {
 	return s.commitTime
 }
 
-// The returned ValidatorSet gets mutated upon s.Commit*().
+// The returned ValidatorSet gets mutated upon s.ExecTx() and s.AppendBlock().
+// Caller should copy the returned set before mutating.
 func (s *State) Validators() *ValidatorSet {
 	s.mtx.Lock()
 	defer s.mtx.Unlock()
 	return s.validators
 }
 
+func (s *State) BlockHash() []byte {
+	s.mtx.Lock()
+	defer s.mtx.Unlock()
+	return s.blockHash
+}
+
 func (s *State) AccountBalance(accountId uint64) *AccountBalance {
 	s.mtx.Lock()
 	defer s.mtx.Unlock()
diff --git a/state/state_test.go b/state/state_test.go
index 03e946b9d..ecfba96e3 100644
--- a/state/state_test.go
+++ b/state/state_test.go
@@ -1,9 +1,12 @@
 package state
 
 import (
+	. "github.com/tendermint/tendermint/blocks"
 	. "github.com/tendermint/tendermint/common"
+	. "github.com/tendermint/tendermint/config"
 	. "github.com/tendermint/tendermint/db"
 
+	"bytes"
 	"testing"
 	"time"
 )
@@ -38,9 +41,27 @@ func TestGenesisSaveLoad(t *testing.T) {
 
 	// Generate a state, save & load it.
 	s0 := randGenesisState(10, 5)
-	// Mutate the state to append one block.
-	block := &Block{Data: Data{Txs: []Tx{}}}
-	s0.AppendBlock(block)
+	// Figure out what the next state hashes should be.
+	s0ValsCopy := s0.Validators().Copy()
+	s0ValsCopy.IncrementAccum()
+	nextValidationStateHash := s0ValsCopy.Hash()
+	nextAccountStateHash := s0.accountBalances.Tree.Hash()
+	// Mutate the state to append one empty block.
+	block := &Block{
+		Header: Header{
+			Network:             Config.Network,
+			Height:              1,
+			ValidationStateHash: nextValidationStateHash,
+			AccountStateHash:    nextAccountStateHash,
+		},
+		Data: Data{
+			Txs: []Tx{},
+		},
+	}
+	err := s0.AppendBlock(block)
+	if err != nil {
+		t.Error("Error appending initial block:", err)
+	}
 
 	// Save s0, load s1.
 	commitTime := time.Now()
@@ -53,7 +74,15 @@ func TestGenesisSaveLoad(t *testing.T) {
 		t.Error("CommitTime was not the same")
 	}
 	// Compare height & blockHash
-	// XXX
+	if s0.Height() != 1 {
+		t.Error("s0 Height should be 1, got", s0.Height())
+	}
+	if s0.Height() != s1.Height() {
+		t.Error("Height mismatch")
+	}
+	if !bytes.Equal(s0.BlockHash(), s1.BlockHash()) {
+		t.Error("BlockHash mismatch")
+	}
 	// Compare Validators
 	s0Vals := s0.Validators()
 	s1Vals := s1.Validators()
diff --git a/state/validator.go b/state/validator.go
index 8154795ef..0995b75c1 100644
--- a/state/validator.go
+++ b/state/validator.go
@@ -5,6 +5,7 @@ import (
 
 	. "github.com/tendermint/tendermint/binary"
 	. "github.com/tendermint/tendermint/common"
+	"github.com/tendermint/tendermint/merkle"
 )
 
 // Holds state for a Validator at a given height+round.
@@ -155,3 +156,17 @@ func (vset *ValidatorSet) GetProposer() (proposer *Validator) {
 	}
 	return
 }
+
+// Should uniquely determine the state of the ValidatorSet.
+func (vset *ValidatorSet) Hash() []byte {
+	ids := []uint64{}
+	for id, _ := range vset.validators {
+		ids = append(ids, id)
+	}
+	UInt64Slice(ids).Sort()
+	sortedValidators := make([]Binary, len(ids))
+	for i, id := range ids {
+		sortedValidators[i] = vset.validators[id]
+	}
+	return merkle.HashFromBinaries(sortedValidators)
+}