# Digital Assets Glossary Organized by Subject ## Stablecoins & Currency **Algorithmic Stablecoin** — A stablecoin that maintains its value through computer code and economic incentives rather than cash reserves. These are risky because they lack tangible backing. The Terra Luna collapse is a famous example. **Central Bank Digital Currency (CBDC)** — A digital version of a country's official currency issued by the central bank (like the Federal Reserve). Different from stablecoins because it's government-backed official money. **Crypto-backed Stablecoin** — A stablecoin backed by other cryptocurrencies locked in smart contracts. These are typically overcollateralized to account for underlying crypto volatility. **E-Money Token (EMT)** — A digital token representing a claim on fiat currency issued by licensed financial institutions. Requires Electronic Money Institution (EMI) authorization in the EU. **Fiat-backed Stablecoin** — A stablecoin backed by actual cash or equivalent assets held in reserve (like U.S. Treasury bonds). **Frontier Token (FRNT)** — Wyoming's state-issued stablecoin, the first fiat-backed, fully reserved stable token issued by a public entity in the United States. Deployed on multiple interoperable blockchains with a 102% reserve requirement. **Payment Stablecoin** — A stablecoin designed primarily for transactions and value transfer, where yield from reserves goes to the issuer rather than token holders. Governed by the Genius Act. **Peg/De-pegging** — A stablecoin is "pegged" to the dollar when it maintains a value of approximately $1. "De-pegging" occurs when the price falls below $1. **Redemption** — The process of converting a stablecoin or token back into its underlying asset (typically USD $1.00). **Reserve Requirement** — The percentage of deposits a financial institution must hold. For example, Wyoming requires 102% reserve collateralization for its Frontier (FRNT) token. **Stablecoin** — A digital currency designed to maintain a stable value, typically pegged to the U.S. dollar. **USDC (USD Coin)** — A fiat-backed stablecoin issued by Circle, the second largest stablecoin by market capitalization. Primarily US-focused with strict reserve requirements and regular attestations. **USDT (Tether)** — The largest stablecoin by market capitalization, issued by Tether Limited. Widely used globally for trading and remittances. **Yield-bearing Stablecoin** — A stablecoin structured as a security where yield from underlying reserves (typically Treasury investments) passes through to the token holder rather than the issuer. Regulated by the SEC rather than under the Genius Act. ## Real-World Assets & Tokenization **Asset Onboarding** — Process of preparing real-world assets for tokenization, including regulatory filings and asset diligence. **Asset-Referenced Token (ART)** — A digital token representing claims on a pool of assets (as opposed to a single fiat currency). Regulated under MiCA in the EU. **Digital Twins** — Digital representations of real-world assets on a blockchain, enabling fractional ownership and trading while the physical asset remains off-chain. **Fractional Ownership** — When an asset is divided into many digital shares, allowing multiple people to own parts of it. **Permissionless RWA Tokens** — Tokens distributed freely on blockchain while maintaining segregation, redemption rights, and regulatory oversight. **Real-World Asset (RWA)** — Physical or traditional financial assets being converted to digital form: real estate, securities, bonds, commodities, art, intellectual property. **Reversible Tokenization** — Ability to convert tokenized assets back to off-chain form while maintaining onchain governance. **Tokenization** — The process of converting a real-world asset (property, stocks, commodities) into a digital token on a blockchain. **Tokenized Asset Vehicles (TAVs)** — A proposed legal structure creating segregated entities to hold securities or commodities for compliant token distribution. ## Blockchain Technology & Infrastructure **Asynchronous Byzantine Fault Tolerant (aBFT)** — A consensus mechanism property where a network can achieve agreement even when some nodes are offline or experiencing network outages. Used by Hedera to ensure high security and reliability. **Avalanche** — A public blockchain platform designed for high throughput and low latency, used by Wyoming for deploying the Frontier Token. **Blockchain** — A distributed digital ledger-a shared database that records transactions across many computers. No single entity controls it, and records are difficult to alter. **Centrifuge** — Blockchain protocol enabling DeFi connections for real-world assets. **Chainlink** — Prominent oracle network providing real-world data to smart contracts. **Chainlink CCIP (Cross-Chain Interoperability Protocol)** — A protocol enabling secure communication and asset transfers between different blockchain networks. **Composability** — The ability of blockchain applications and protocols to work together seamlessly, sharing data and functionality. **Cross-chain Bridge** — Infrastructure that enables assets and data to move between different blockchain networks, maintaining value while allowing users to access multiple ecosystems. **Deterministic Finality** — A property where once a transaction is confirmed, it is guaranteed to be final and cannot be reversed. Provides legal certainty that a transaction has occurred, unlike probabilistic finality where certainty increases over time. **Distributed Ledger** — A record-keeping system spread across many computers rather than stored in one location. **Distributed Verifier Nodes (DVNs)** — Independent computers that verify transactions across blockchains to ensure no single entity controls validation. **EVM (Ethereum Virtual Machine)** — The runtime environment for executing smart contracts on Ethereum. EVM-compatible blockchains can run Ethereum applications without modification. **Front-running** — Trading ahead of known pending transactions to profit from anticipated price movements. Some blockchain architectures are designed to prevent this. **Hedera** — A public distributed ledger network using hashgraph consensus, governed by a council of Fortune 500 companies. Features deterministic finality, fixed fees, and built-in compliance capabilities. **Hyperledger Fabric** — A permissioned blockchain framework hosted by the Linux Foundation, designed for enterprise use cases requiring privacy and access controls. **Interoperable Blockchains** — Blockchains that can communicate and share data with each other, rather than operating in isolated silos. **IPFS (InterPlanetary File System)** — A decentralized file storage system. **Layer 2** — A second blockchain built on top of a main blockchain (like Ethereum) to improve speed and reduce costs. **Layer Zero** — Blockchain interoperability solution using distributed verification nodes. **Mainnet** — The live, production version of a blockchain where transactions have real value. **Nakamoto Coefficient** — A measure of blockchain decentralization, counting how many entities would need to collude to control the network. **Permissionless Blockchain** — A blockchain anyone can join and use without approval from a central authority. **Proof-of-Stake (PoS)** — A consensus mechanism where validators are selected to create new blocks based on the amount of cryptocurrency they have "staked" as collateral. Uses significantly less energy than proof-of-work. **Proof-of-Work (PoW)** — A consensus mechanism requiring computers to solve complex mathematical puzzles to validate transactions and create new blocks. Used by Bitcoin; energy-intensive. **Sequencer** — A computer or entity that orders and organizes transactions on a blockchain. **Smart Contracts** — Self-executing computer programs on a blockchain that automatically carry out agreements when conditions are met. **Solana** — A high-performance public blockchain known for fast transaction speeds and low costs, used by various stablecoin projects including Western Union's USDPT. **Testnet** — A testing version of a blockchain where transactions don't involve real value. **Web3** — The third generation of the internet, based on decentralized networks built on blockchain, tokenization, and related technologies. **Web3 DPI (Digital Public Infrastructure)** — Blockchain-based digital infrastructure serving as public goods like stablecoins and tokenization platforms. ## Tokens & Digital Assets **Burning** — The process of permanently removing tokens from circulation by sending them to an unrecoverable address, typically done when users redeem stablecoins for fiat currency. **Cap Table Management** — Real-time tracking and management of share ownership and changes onchain. **DeFi (Decentralized Finance)** — Financial services built on blockchain networks through smart contracts, allowing users to trade, lend, borrow, and earn yield without intermediaries. **Digital Asset** — Any valuable item stored, represented, or traded in digital form on computer networks or blockchains (cryptocurrency, tokenized property, digital files). **ERC-20 Tokens** — The Ethereum standard for fungible tokens (identical, interchangeable tokens). **ERC-3643** — A compliance-focused Ethereum token standard that embeds verified credentials and permission layers directly into smart contracts. **Geofencing** — Limited to a specific geographic area through technology controls. **HBAR** — The native cryptocurrency of the Hedera network, used to pay transaction fees and for network governance. **Issuer-owned Smart Contracts** — Smart contracts controlled by the asset issuer to manage tokenized shares, yield distribution, and token behavior. **Ledger-based Securities/Equities** — Securities recognized as valid and enforceable when issued on blockchain without requiring physical certificates. **Liquidity Pool** — Collection of tokens held in a smart contract to facilitate trading. **Minting** — The process of creating new tokens, typically when a user deposits fiat currency and receives stablecoins in return. **On-chain Capital Markets** — Financial markets operating on blockchain networks where tokenized assets can be traded 24/7. **Programmatic Yield** — Automated, smart contract-based distribution of investment returns to token holders. **Total Value Locked (TVL)** — Total amount of cryptocurrency, stablecoins, or digital assets currently held in a protocol or platform. **Wallet Address** — A digital account identifier that allows someone to receive, hold, or send digital assets on a blockchain. **Whitelisting** — Approval of specific addresses or users allowed to transact, restricting who can use a particular token or system. **Yield** — Investment returns or interest earned on deposits or holdings. **Yield-generating Strategies** — Investment approaches producing consistent returns through mechanisms like Treasury investments, now increasingly tokenized. ## Regulatory & Compliance Frameworks **AML/KYC** — Anti-Money Laundering/Know Your Customer-regulations requiring financial entities to verify customer identity and prevent illegal financial activity. **CFTC (Commodity Futures Trading Commission)** — The U.S. federal agency that regulates commodity futures, options, and swaps markets. The Clarity Act would clarify its jurisdiction over certain digital assets. **Chain-wide AML** — Anti-Money Laundering enforcement applied at the blockchain protocol level to ensure compliance across all transactions. **Clarity Act** — Proposed federal legislation clarifying which digital assets fall under SEC vs. CFTC jurisdiction. **Digital Asset Business Act (DABA)** — Bermuda's 2018 comprehensive licensing regime for digital asset activities, overseen by the Bermuda Monetary Authority. **Digital Bond Grant Scheme (DBGS)** — Hong Kong's 2024 initiative subsidizing up to 50% of eligible expenses for DLT-based digital bonds to accelerate tokenization adoption. **DLT Act and FINMA Oversight** — Switzerland's 2021 Distributed Ledger Technology Act providing legal certainty for ledger-based securities. **Emergency Rulemaking** — Expedited process for adopting temporary rules quickly, bypassing normal notice-and-comment periods. **FCA (Financial Conduct Authority)** — The United Kingdom's financial regulatory body, which has proposed frameworks for stablecoin regulation. **Genius Act** — U.S. federal legislation creating a framework for stablecoins with three categories: federally qualified, state-qualified, and state-issued. **Institutional-Grade Compliance** — Compliance framework meeting standards required by regulated financial institutions. **MiCA** — Markets in Crypto-Assets Regulation-the European Union's comprehensive cryptocurrency regulatory framework. **Modular Permissioning** — A flexible access control system allowing different layers of permissions to be enabled or disabled based on regulatory needs. **OCC (Office of the Comptroller of the Currency)** — The U.S. federal agency that charters, regulates, and supervises national banks. OCC Interpretive Letter 1183 allows national banks to engage in certain crypto activities. **OFAC (Office of Foreign Assets Control)** — The U.S. Treasury Department office that administers economic and trade sanctions. Blockchain networks must ensure no sanctioned entities validate transactions. **Project Guardian** — Singapore's 2022 initiative (expanded since) testing tokenization frameworks with dozens of financial institutions, pioneering verified credential models for on-chain KYC. **Public Comment Period** — Mandatory phase where proposed rules are published and the public can submit feedback before final adoption. **Reg A, Reg D, Reg CF** — Different SEC regulations for offering and selling securities: Reg A (Small Business Offering Registration), Reg D (Private offering exemption), Reg CF (Crowdfunding offerings). **Reserve Requirement** — Wyoming's overcollateralization mandate requires that for every $100 of tokens issued, $102 or more in reserves must be held in cash, U.S. Treasury bills, or repurchase agreements. **Rule 2A7** — SEC regulation governing money market funds, requiring holdings of high-quality liquid assets with short maturities. Compliance with Rule 2A7 ensures a fund maintains a stable $1 NAV. **Transfer Restrictions** — Limitations on who can buy, sell, or hold a digital asset for regulatory compliance. ## Legal Structures & Entity Types **Body Politic and Corporate** — Legal designation establishing the Wyoming Stable Token Commission as an instrumentality of the state. **DAO LLC, DUNA** — Wyoming-specific legal entity types for decentralized organizations. DAO LLC = Decentralized Autonomous Organization structured as a Limited Liability Company. DUNA = Decentralized Unincorporated Nonprofit Association. **Incorporated Segregated Accounts Companies (ISACs)** — A Bermuda legal structure allowing creation of segregated accounts with separate legal personality to hold off-chain assets. **Instrumentality of the State** — A legal entity created by the state to carry out specific functions on behalf of the state. **Interstate Compact** — Agreement between multiple states to cooperate on an issue. **Licensed Service Provider (LSP)** — Entities authorized to distribute stablecoins to end users, performing KYC/AML verification and handling fiat-to-token conversion. Examples include exchanges, payment platforms, and community banks. **National Trust Bank** — A federal banking charter issued by the OCC allowing institutions to provide custody and fiduciary services. Anchorage Digital became the first crypto-native company to receive this charter in 2021. **Special Purpose Depository Institution (SPDI)** — A state-chartered financial institution designed to hold reserves for digital assets. **Special Purpose Vehicle (SPV)** — A legal entity created to hold off-chain assets separately from a parent company, protecting assets if the parent fails. ## Asset Management & Custody **Asset Diligence / Ratings** — Rigorous vetting process for underlying assets including analysis by rating agencies to assess creditworthiness. **Bankruptcy Remoteness** — A legal protection mechanism where assets held in a segregated account are isolated from the issuer's creditors and insolvency proceedings. **Collateral Management** — Managing assets pledged as security for loans or transactions. Blockchain-based systems enable faster global movement. **Collateralized Lending** — Using digital assets (such as Bitcoin) as collateral for credit extension, allowing asset holders to access liquidity without selling and triggering tax consequences. **Custodian** — An entity that securely holds digital or financial assets on behalf of clients (e.g., Fireblocks, Anchorage, BitGo). **High-Quality Liquid Assets (HQLA)** — Assets that can quickly be converted to cash without losing value (e.g., U.S. Treasury Bills). **Interest Income** — Profit generated from reserves backing stablecoins or tokenized assets, typically held in Treasury bills or cash. **Managed Custody** — A hybrid custody approach where external infrastructure is used but the organization maintains control over assets and signing authority. **Multi-signature (Multi-sig)** — A security mechanism requiring multiple private key holders to approve a transaction before it executes. For example, 6 of 7 signers might be required for large transfers. **NAV (Net Asset Value)** — The per-share value of a fund or tokenized asset, calculated by subtracting liabilities from assets. **Overcollateralization** — When the value of assets backing a token exceeds the value of the token issued, providing extra security. **Qualified Custody** — Third-party custody arrangement where a regulated custodian (such as Coinbase, BitGo, or Anchorage) holds assets with fiduciary obligations. **Segregated Accounts** — Legally separate holdings within a single entity maintaining independent liability and bankruptcy protection. **Self-Custody** — Full organizational control over digital assets using internally managed security infrastructure, typically with multi-signature requirements. **Transfer Agent** — An entity that maintains records of security ownership and processes ownership changes. For tokenized securities, the transfer agent maintains the blockchain-based ledger. ## Market Operations & Trading **Bid-Ask Spread** — The difference between the highest price a buyer will pay and the lowest price a seller will accept. Smaller spreads indicate more efficient markets. **Broker Dealer of Record** — A licensed securities firm serving as the official broker-dealer for tokenized asset issuances and trading. **Buy Side / Sell Side** — The buy side refers to investors purchasing assets (demand); the sell side refers to those issuing or distributing them (supply). **Counterparty Risk** — The risk that the other party in a financial transaction will default. Stablecoins and blockchain settlement can mitigate this. **Demurrage** — Fees charged when cargo ships remain at port beyond the allowed time, often due to delayed fund transfers. Cross-border stablecoin payments can eliminate these delays. **Disintermediation** — Removing middlemen from transactions, reducing the need for banks and payment processors. **Global Distribution** — Ability to reach tokenized assets to investors worldwide without establishing separate corporate entities in each jurisdiction. **Liquidity** — How easily an asset can be bought, sold, or converted to cash. High liquidity means quick transactions. **On/Off Ramp** — Gateway infrastructure enabling conversion between fiat currency and digital assets. **Secondary Liquidity / Secondary Market** — The ability to trade tokenized assets after initial issuance. **Settlement** — The final completion of a transaction. Blockchain settlement happens in seconds vs. days with traditional banking. **Surge Pricing** — Dynamic fee increases during network congestion, where transaction costs can spike 1000-2000x on some blockchain networks. Fixed-fee networks like Hedera avoid this issue. ## Compliance & Identity Verification **Constitutional Protections** — Recognition of First Amendment and due process rights in token design. FRNT permits lawful uses and requires court orders for asset seizure. **Interdiction** — Freezing or seizing tokens, requiring a valid court order and recognizing constitutional protections. **Know Your Business (KYB)** — Enhanced due diligence on business entities and platforms, examining operations, ownership, financial health, and compliance capabilities. **Trust Anchors** — Regulated financial institutions that verify and issue digital credentials for investor identity, accreditation, and compliance. **Verified Credentials (VC)** — Tamper-resistant digital credentials verifying investor identity, accreditation, and compliance status; integrated onchain via smart contracts. Enable selective disclosure (e.g., proving age 21+ without revealing birthdate). ## Decentralized Applications & Systems **dApps (Decentralized Applications)** — Software applications running on decentralized blockchain networks rather than centralized servers. **Hash Spheres** — Private permissioned networks that can operate interoperably with public blockchain networks, similar to an intranet-to-internet relationship. Used for sensitive applications requiring additional privacy. ## Data & Cryptography **Homomorphic Encryption** — A type of encryption allowing computations on encrypted data without decrypting it first. **Oracle** — A service that brings real-world data onto the blockchain, enabling smart contracts to execute based on real-time information. **Zero-Knowledge Proof** — A cryptographic method proving something is true without revealing the details.