A blockchain is a distributed database or ledger that is shared among the nodes of a computer network. As a database, a blockchain stores information electronically in digital format. The innovation with a blockchain is that it guarantees the integrity and security of a record of data without the need for a trusted third party. One key difference between a typical database and a blockchain is how the data is structured. A blockchain collects information together in groups, known as blocks, that hold sets of information. (Diagram) Blocks have certain storage capacities and, when filled, are closed and linked to the previously filled block, forming a chain of data known as the blockchain. All new information that follows that freshly added block is compiled into a newly formed block that will then also be added to the chain once filled.

Database Vs Blockchain Architecture

Blockchain software is like any other software. The first of its kind was Bitcoin, which was released as open-source software, making it available to anyone to use or change. There are a wide variety of efforts across the blockchain ecosystem to improve upon Bitcoin’s original software. Ethereum has its own open source blockchain software. Some blockchain software is proprietary and not available to the public. 

When a digital transaction occurs in a blockchain network, it is grouped together in a cryptographically-secure “block” with other transactions that have occurred in the same time frame. The block is then broadcast to the network.

A blockchain network is comprised of nodes or participants who validate and relay transaction information.

The block of transactions is verified by participants called miners, who use computing power to solve a cryptographic puzzle and validate the block of transactions.

The first miner to solve and validate the block is rewarded.

Each verified block is connected to the previously verified block, creating a chain of blocks. 

How a Blockchain works

Layer-1 is the term that’s used to describe the underlying main blockchain architecture.

Layer 1s are tokens (Crypto's) with their own blockchains, while Layer 2s are built on top of Layer 1 blockchains, usually through smart contract technology.

Layer-2, on the other hand, is an overlaying network that lies on top of the underlying blockchain.

Layer 2s can be new tokens, or more complex projects known as decentralized apps, or dApps

TOKENS are digital assets defined by a project or smart contract and built on a specific blockchain.

Tokens are also referred to as crypto currency. Examples of crypto currency are Bitcoin L1 (BTC) Ethereum L1 (ETH) ,Poly L2 (Matic) or Stablecoins.


There are currently thousands of cryptocurrencies in existence. Many of these have only a very small following, while some, like bitcoin and ether,1 have many users and investors.

Bitcoin was first described in a white paper released in 2008 and published under the name “Satoshi Nakamoto.” The protocol underlying Bitcoin was released in 2009 as open source software2.

The Bitcoin network is a worldwide network of computers that run Bitcoin software.

Stablecoins are cryptocurrencies the value of which is pegged, or tied, to that of another currency, commodity, or financial instrument.

Stablecoins generally are back by real assets (dollars) collateralized crypto assets (Maker DAI’s stable coin is pegged to dollar backed by ETH) or Algorithmic Stablecoins(UST highlighted the failure of this approach for this project- Terra)

Crypto wallets store private keys, which are the passwords that give you access to your cryptocurrencies.

Crypto wallets can be either “hot wallets,” meaning they are connected to the Internet, or “cold wallets,” meaning they are offline.

Hot wallets are generally more susceptible to being hacked than cold wallets, so the best practice is to use a cold wallet for the long-term storage of cryptocurrencies.

A cryptocurrency exchange, or a digital currency exchange (DCE), is a business that allows customers to trade cryptocurrencies or digital currencies for other assets, such as conventional fiat money or other digital currencies.

An NFT is a digital asset that represents real-world objects like art, music, in-game items, and videos.

They are bought and sold online, with cryptocurrency and they are generally encoded with underlying software as many cryptos.

Since 2014, NFTs are gaining popularity now because they are  becoming a way to buy and sell digital artwork. The market for NFTs was worth a staggering $41 billion in 2021 alone, an amount that is approaching the total value of the entire global fine art market.

Non-fungible tokens (NFTs) are not in general mutually interchangeable.

In contrast, bitcoin is a fungible token, meaning that one bitcoin can be readily exchanged for another bitcoin, much in the same way one Irish Euro can be exchanged for another Italian Euro.

NFTs are also generally one of a kind, or at least one of a very limited run, and have unique identifying codes and functionality.


A smart contract is a self-executing contract with the terms of the agreement between buyer and seller being directly written into lines of code.

The code and the agreements contained therein exist across a distributed, decentralized blockchain network.

The code controls the execution, and transactions are trackable and irreversible.

Decentralized finance—often called DeFi or open finance—refers to the economic paradigm shift enabled by decentralized technologies, particularly blockchain networks. DeFi signals the shift from a historically centralized and closed financial system toward a universally accessible economy that is based on open protocols that are interoperable, programmable, and composable.

From streamlined and secure payment networks to automated loans to USD-pegged stablecoins, decentralized finance has emerged as one of the most active sectors in the blockchain space.

Some of the defining factors of a DeFi application include permissionless architecture (anyone can participate), transparent and auditable code, and interoperability with other DeFi products. 

DeFi Score offers a single, consistently comparable value for measuring DeFi platform risk.

The Markets in Crypto assets (MiCA) Regulation is the EU regulation governing issuance and provision of services related to crypto assets and stablecoins.

Adopted on April 20, 2023, by the European Parliament, MiCA is the first and only legislation of its kind in the world and leads the way for other jurisdictions.

MiCA will cover crypto assets that are not regulated by existing financial services legislation. Key provisions for issuing and trading crypto-assets (including asset-reference tokens and e-money tokens) cover transparency, disclosure, authorisation, and supervision of transactions.

MiCA defines a crypto asset as “a digital representation of value or rights which may be transferred and stored electronically, using distributed ledger technology or similar technology.”


The Regulation draws a distinction between ‘cryptocurrencies’ on one hand and 'tokens' on the other. MiCA also sets requirements for crypto asset issuers and crypto asset service providers (CASPs).

Crypto asset issuers must provide complete and transparent information about the crypto asset they issue and comply with disclosure and transparency rules.

Crypto asset service providers must be registered and implement security measures and anti-money laundering compliance.

It covers three types of crypto assets:

  • Utility tokens, which provide access to goods or services;
  • Payment tokens, which are used as a means of payment or can be traded for other MiCA-regulated tokens;
  • E-money tokens, which are backed by fiat currencies and used to make electronic payments

The MiCA regulation is still subject to approval by the European Parliament and the European Council.

The European Commission will also need to implement further acts to specify certain technical requirements for MiCA-regulated activities. MiCA is expected to come into effect by 2024.

MiCA provides a regulatory framework for digital assets that use decentralized ledger technology (DLT). The main cryptoassets covered by MiCA are:


  1. Asset-referenced tokens (ARTs),, a type of crypto-asset that purports to maintain a stable value by referring to the value of several fiat currencies that are legal tender, one or several commodities or one or several crypto-assets, or a combination of such assets.

This category includes all cryptoassets that do not qualify as 'electronic money tokens,' which purport to maintain a stable value by referring to the value of a fiat currency that is legal tender.

An example of this is Digix (DGX), backed by an equivalent amount of physical gold stored in a secure vault.

  1. Electronic money tokens (EMT),, which purport to maintain a stable value by referring to the value of a fiat currency that is legal tender.

The difference between ARTs and EMTs is the configuration of the underlying asset that supports the price.

ARTs use non-cash assets or a basket of currencies, while EMTs use a single currency, which brings them closer to the concept of electronic money.

  1. Cryptoassets that are not considered ARTs or EMTs,such as ‘utility tokens,’ which are intended to provide digital access to a good or service, available on DLT, and are only accepted by the issuer of that token.

Unlike security-type tokens, they are not considered a financial instrument under the securities laws of many countries.

MiCA excludes new paradigms such as the DeFi (Decentralized Finance) industry and non-fungible tokens (NFT).

According to the definition provided by the European Central Bank, DeFi is a new way of providing financial services that dispenses with traditional centralized intermediaries and instead relies on automated protocols.

The USA has not passed any stand-alone crypto legislation at present. Currently crypto is regulated by various organisations in the USA.

  • Securities and Exchange Commission (SEC): Regulates securities offerings, including initial coin offerings (ICOs), and enforces securities laws.
  • Financial Crimes Enforcement Network (FinCEN): Requires crypto businesses to register as money services businesses (MSBs) and comply with anti-money laundering (AML) regulations.
  • Commodity Futures Trading Commission (CFTC): Regulates derivatives and futures trading in cryptocurrencies.

Currently crypto is regulated by Financial Conduct Authority (FCA).

The FCA Regulates crypto-assets and crypto-related activities, including registration requirements for crypto businesses.

Switzerland has been very pro-active in leading digital assets/ cryptocurrency regulations.

Swiss Financial Market Supervisory Authority (FINMA) regulates crypto businesses, including ICOs, anti-money laundering, and securities regulations.

Switzerland as a non-EU country will still be affected by MiCA as most crypto-related businesses have ties to EU jurisdictions.