Page 167 - ITU-T Focus Group Digital Financial Services – Technology, innovation and competition

ITU-T Focus Group Digital Financial Services
Technology, Innovation and Competition

Annex A: How a blockchain operates

Data in a blockchain is stored in fixed structures called ‘blocks,’ which consist of a header and the blockchain’s
content. The block header includes metadata, such as a unique block reference number, the time the block
was created, and a link back to the previous block.

The block data ‒ its content ‒ is usually a validated list of digital assets and instruction statements, such as
transactions made, their amounts, and the addresses of the parties to those transactions. The blocks are
stored one after the other in a continuous ledger, but they can only be added when the participants ‒ nodes
in a distributed network ‒ reach a quorum (consensus). The nodes on the blockchain independently verify
transactions before agreeing on those that are valid.
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As shown below, the chain is only appended, never retrospectively edited – the key design feature of
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blockchains that facilitates immutability of the data placed on the blockchain. DLTs then are tamper evident.
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Such that any edits will be obvious to others in ways that will prevent their broad uptake on the chain.

Exhibit 3: How blocks are added to a blockchain

The link that ties individual blocks together is the timestamp. Recording the timing of the transaction is essential
to the nature of the blockchain. Each record is time/date stamped and provided with a unique cryptographic
signature, which is designed to ensure the authenticity and integrity of the ledger.
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Using the latest block, it is possible to access all previous blocks linked together in the chain, so a blockchain
database retains the complete history of all assets and instructions executed since the very first one.
This makes the data in a blockchain verifiable and independently auditable. Once placed on the blockchain,
data on the blockchain is said to be ‘hashed.’

150 Vermont (2016) ibid
151 Image from Vermont (2016) ibid
152 Deloitte (2016) ibid
153 McLean, S and Deane-Johns S (2016), Demystifying Blockchain and Distributed Ledger Technology – Hype or Hero?, available at
https:// media2. mofo. com/ documents/ 160405blockchain. pdf; de Meijer, CRW (2016) ibid

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