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Summary: In this paper, a new strategy for vibration‐based structural health monitoring is proposed, specifically designed for smart sensors with edge computing capabilities organized in a line topology. This solution is aimed at maximizing resource optimization and enables the identification of modal parameters even for large or densely instrumented structures, where star‐topology monitoring systems are typically unsuitable. In particular, an efficient data management procedure is proposed to reduce data transmission, thus improving efficiency and minimizing maintenance interventions for battery replacement in wireless applications. The maximum volume of transmitted data can be selected by the user, based on the specific requirements of the network. Although the considerable reduction of data size, the proposed approach enables accurate estimation of the structural parameters in challenging scenarios where other techniques generally fail. Modal parameters are identified in an online fashion, enabling near real‐time detection and localization of early damage. Applications to a real case study instrumented with a dense sensor network show the effectiveness of the proposed approach and the possibility of localizing structural defects in slightly damaged civil structures. [ABSTRACT FROM AUTHOR]