What is blockchain? By definition, a blockchain, or chain of blocks, is a ledger of transactions copied onto many computers, called nodes, that all participants can verify. Transactions are grouped into blocks added one after another, according to a common rule called consensus. It is the technology behind cryptocurrencies such as Bitcoin and Ether, but also behind tokenised securities, which Switzerland regulates through the DLT Act on distributed ledger technology, in force since 2021.
This page opens our blockchain and tokenisation section: how it works, uses, limits and the Swiss framework.
How does a blockchain work?
The ledger is distributed among the participants. According to the Swiss Financial Market Supervisory Authority (FINMA), in its press release of 18 March 2025, transaction data is recorded in a decentralised manner on different nodes and can be verified by all participants.
A transaction goes through four steps, according to the documentation of ethereum.org, the reference website of the Ethereum network:
- the user signs it with their private key, usually from a wallet;
- a node checks the funds and the signature, then broadcasts it to the other nodes;
- a participant groups pending transactions into a new block;
- the other nodes validate this block and add it to their copy of the chain.
Each block carries a calculated fingerprint, the hash. According to ethereum.org, if a single transaction changes, the hash becomes completely different, which signals fraud. The more blocks are added on top of a transaction, the harder it becomes to reverse it.
How do participants reach agreement?
The consensus mechanism determines who can add the next block. It also prevents the same coin from being spent twice. Three main families coexist.
Proof of work is the oldest. According to ethereum.org, it kept Bitcoin and Ethereum secure for many years. Miners search by trial and error for a valid number, the nonce, without which no block is accepted. To cheat over time, one would need more than 51% of the network's computing power.
Proof of stake replaces computing power with a stake. Ethereum has used it since September 2022. To become a validator, you must deposit 32 ether (ETH) into a dedicated contract. A randomly selected validator proposes a block in each 12-second slot; a committee of validators then votes on its validity. A block is "finalised" when votes representing at least two thirds of the staked ETH approve it. A validator who cheats can lose all or part of their stake.
Proof of authority entrusts validation to identified signers, who produce blocks in turn. According to ethereum.org, it is used mainly for private chains and test networks.
Public or private blockchain: what is the difference?
The difference lies in who validates the blocks. On a public blockchain such as Ethereum, anyone can follow asset transfers, which are linked to an address rather than an identity. On a private chain, a small group of authorised signers keeps the ledger.
| Criterion | Public blockchain (Ethereum) | Private chain (proof of authority) |
|---|---|---|
| Who validates | Any validator who deposits 32 ETH | Signers chosen for their reputation |
| Identity of participants | Pseudonymous: a cryptographic address | Known validators, for example through an identity check |
| Confirmation speed | 12-second slots, finality per epoch of 32 slots | Sometimes less than a second |
| Weak point | Complexity, stake required | Few validating nodes, so more centralised |
Source: ethereum.org documentation.
What is a blockchain used for?
Beyond cryptocurrencies, most uses rely on smart contracts. A smart contract is a program stored on the blockchain. According to ethereum.org, it follows "if this, then that" logic and runs according to the rules of its code, which can no longer be modified once created. The term comes from computer scientist Nick Szabo, who presented the concept in 1994. Ethereum lists among its uses stablecoins, non-fungible tokens (NFTs) and insurance policies that pay out automatically.
Asset tokenisation is its financial application. It represents a share, a fund unit or a claim as a token recorded on a blockchain. In Switzerland, the offering remains thin: according to the University of St. Gallen's Swiss Blockchain Survey 2026, only 12% of the 25 institutions surveyed in the third quarter of 2026 offered tokenised assets. The figure was 8% for real estate tokenisation in Switzerland and 8% for debt instruments, such as the tokenised bond in Switzerland.
What are the limits of blockchain?
Blockchain does away with the need for a trusted intermediary, but it has its weaknesses.
- Energy. Shortly before switching to proof of stake, Ethereum miners consumed around 70 terawatt-hours (TWh) per year, as much as the Czech Republic, according to Digiconomist as of 18 July 2022, cited by ethereum.org.
- Finality. A record on the blockchain is never one hundred percent final, FINMA points out in its 2024 review. It requires platforms to state clearly when a transfer of ownership becomes legally definitive.
- Code errors. A smart contract can no longer be modified once created. FINMA requires platforms that settle on a public blockchain to have the code of their smart contracts audited, to detect flaws and errors.
- Blind signing. According to ethereum.org, transaction data is so hard to read that users risk approving an operation without understanding it.
- Centralisation. Proof-of-authority chains rely on few validators. Malicious signers could censor transactions on them, even though these attacks are mitigated.
Why is finance betting on a hybrid model?
Financial market players do not plan to put everything on a blockchain. That is the conclusion of a round table held on 23 June 2026 in Zurich, at the Point Zero Forum, whose report was published in September 2026 according to Fintechnews Switzerland. Eleven executives took part, including Lucas Bruggeman, CEO of BX Swiss and head of digital assets at the Boerse Stuttgart group, as well as executives from Boston Consulting Group (BCG), Temasek and Fireblocks.
According to the participants, blockchain would suit functions that benefit from a shared, automated ledger: ownership registers, asset issuance, settlement and collateral management.
The rest would remain off the chain, or "off-chain": personal data, transaction details and legal documents, for reasons of confidentiality and regulation; price formation and order matching, for reasons of latency. The participants therefore expect the two infrastructures to coexist for a long time, with parallel systems to fund.
Issuance on blockchain remains modest, but it is growing. According to a 2026 report by the Association for Financial Markets in Europe (AFME), cited by Fintechnews Switzerland, EUR 4.8 billion of fixed-income instruments were issued on distributed ledgers (DLT, for distributed ledger technology) worldwide in 2025, up 48% year on year. Asia accounts for 3.8 billion of this, or 80%. For its part, Citi bank estimates that the global market for tokenised assets could reach USD 5,500 billion in 2030 in its base case scenario. Its range runs from 2,700 to 8,200 billion.
What framework applies to blockchain in Switzerland?
Switzerland did not create a separate law: it adapted its existing laws. The Federal Act on the Adaptation of Federal Law to Developments in Distributed Ledger Technology, often called the DLT Act, was adopted by Parliament in September 2020. A first part has applied since 1 February 2021: it allows ledger-based securities to be recorded on a blockchain, which paves the way to tokenise the shares of a company limited by shares (SA). According to the Federal Council's press release of 18 June 2021, the rest of the act and its ordinance have applied since 1 August 2021.
The act created a new market infrastructure: the DLT trading facility (Art. 73a et seq. of the Financial Market Infrastructure Act). FINMA authorised the first one on 18 March 2025: BX Digital, a sister company of the BX Swiss exchange within the Börse Stuttgart group. It settles securities on the public Ethereum blockchain and payments through the Swiss Interbank Clearing (SIC) system, operated on behalf of the Swiss National Bank (SNB).
Key figures
- 32 ETH: deposit required to become a validator on Ethereum (ethereum.org).
- Around 70 TWh per year: consumption of Ethereum miners before September 2022 (Digiconomist, cited by ethereum.org).
- 1 August 2021: full application of the Swiss DLT Act (Federal Council).
- EUR 4.8 billion: bond issuance on DLT worldwide in 2025 (AFME).
- 12%: share of the 25 Swiss and Liechtenstein institutions surveyed that offer tokenised assets (University of St. Gallen, third quarter of 2026).
This information describes a technology and its framework. It does not constitute an investment recommendation.
What we do not know yet
- Whether price formation and order matching will one day move onto the chain: the Point Zero Forum participants believe technical progress could make this possible, without putting forward a timetable.
- The size of the market in 2030: Citi's high scenario is three times higher than its low scenario.
Sources
- Fintechnews Switzerland: Industry Stakeholders Predict Hybrid Model for Tokenization in Capital Markets
- ethereum.org: Smart contracts
- ethereum.org: Proof of stake (PoS)
- ethereum.org: Proof of work (PoW)
- ethereum.org: Proof of authority (PoA)
- Federal Council: entry into force of the remainder of the DLT Act (18 June 2021)
- FINMA: first DLT trading facility (18 March 2025)
- FINMA: Development of digitalisation in the financial sector (2024)
