Shared vocabulary
The words and phrases we use to talk about this project. Each term has a plain-English definition and a tighter technical line. 50 terms across 4 sections.
A shared digital ledger that records transactions across many computers at once, so no single party controls the record and entries can't easily be altered after the fact.
A cryptographically-linked chain of blocks of transactions, maintained by a distributed network reaching consensus via a defined protocol.
also: Central Bank Digital Currency
Digital money issued directly by a central bank. Like physical cash, but digital. Different from a stablecoin because it's a liability of the central bank rather than a private issuer. U.S. retail CBDC was banned by federal executive order in 2025.
A liability of the central bank issued in tokenized form, either retail (available to consumers) or wholesale (limited to banks for interbank settlement).
also: Know Your Customer, Anti-Money Laundering
The body of regulations requiring financial institutions to identify their customers (KYC) and detect and report suspicious activity (AML). The lens through which banks evaluate every new payment rail, including stablecoins.
KYC obligations under the Bank Secrecy Act and FinCEN rules. AML covers transaction monitoring, suspicious activity reports (SARs), and OFAC sanctions screening. Both extend to virtual asset service providers (VASPs).
A stablecoin specifically designed and regulated for use as a means of payment, with full reserves and clear redemption rights. A new U.S. regulated category established by the GENIUS Act (2025).
A subcategory of fiat-backed stablecoin issued under a payment instrument or money transmission framework, distinguished by 1:1 reserve backing in safe liquid assets and statutory redemption guarantees.
also: private blockchain, permissioned blockchain
A blockchain where access is restricted to known, vetted participants. Used inside banks, consortiums, or enterprise networks. Functions more like shared infrastructure than a public utility.
A distributed ledger with gated read, write, and validate permissions controlled by a governing entity or consortium, typically using BFT-style consensus instead of open economic incentives.
also: public permissioned blockchain
A blockchain that anyone can read and submit transactions to, but where only known, vetted operators are allowed to validate or run the network. Open at the edges, gated at the core.
A distributed ledger offering open read and transaction-submission access while restricting validation to an approved set governed by an entity or consortium, pairing public transparency with permissioned, BFT-style consensus rather than open economic incentives.
also: public blockchain, permissionless blockchain
A blockchain anyone can read, write to, or help operate without asking permission. Bitcoin and Ethereum are the canonical examples.
A blockchain where validator participation and transaction submission are open to any party, secured economically via consensus mechanisms like proof of stake or proof of work.
The amount of customer deposits a bank must hold in reserve rather than lend out. U.S. bank reserve requirements have been set at 0% since 2020. In stablecoin context: how much real-world backing the issuer must keep for tokens in circulation.
For banks, the Federal Reserve's Regulation D mandate. For payment stablecoins under the GENIUS Act framework, 1:1 reserves required in cash and short-term Treasuries.
Returns earned by holding or staking crypto assets. Sometimes called 'interest' but the underlying mechanics and legal treatment can be very different from a bank deposit.
Token-denominated returns from sources including staking rewards (protocol issuance), lending pool interest, liquidity provision fees, or off-chain revenue distributed on-chain.
A digital token designed to hold a steady value, usually pegged 1:1 to a fiat currency like the U.S. dollar. The peg is maintained by backing the tokens with reserves (cash, Treasuries) or, less reliably, by algorithms.
A blockchain-native asset whose price is stabilized against a reference value, typically via fully-reserved fiat backing (USDC, USDT) or overcollateralized crypto (DAI). Algorithmic-only designs have a poor track record.
A bank deposit represented as a token on a blockchain. Still a deposit, still on the bank's balance sheet, just with the transferability and programmability of a digital asset.
A deposit liability of a regulated bank issued as a blockchain token, settling on a permissioned ledger or via a regulated tokenization platform, preserving deposit insurance and legal characterization.
also: Decentralized Finance
Financial services (lending, trading, borrowing) built on blockchains using smart contracts instead of intermediaries. No bank, no broker. Just code, collateral, and on-chain rules.
On-chain protocols (Aave, Uniswap, Compound, MakerDAO) implementing financial primitives without permissioned intermediaries, governed by smart contracts and typically by governance tokens.
Borrowing and lending crypto assets directly through smart contracts. Borrowers post collateral (usually overcollateralized: $150 of ETH to borrow $100 of stablecoin), lenders earn interest from a pool. No credit check, no underwriter.
Permissionless lending protocols (Aave, Compound) where users supply assets to a pool and borrow against overcollateralized positions, with interest rates set algorithmically. Liquidation triggers automatically if collateral ratio falls below threshold.
Splitting ownership of a single asset (a building, a painting, a Treasury bond) into many small digital pieces that multiple people can own. Lowers the minimum investment dramatically.
Subdivision of a tokenized asset into fungible or non-fungible tokens representing partial economic interest, governed by the legal structure of the underlying tokenization wrapper.
also: RWA
Off-chain assets (Treasuries, money market funds, real estate, commodities) represented on a blockchain. The big institutional crossover category right now.
Tokenized representations of off-chain financial or physical assets, often issued via regulated SPV structures. Examples include BlackRock's BUIDL and Franklin Templeton's BENJI (both tokenized money market funds).
Self-executing code that lives on a blockchain. It runs automatically when conditions are met, with no person or institution needed to intervene. The basic building block for 'programmable money.'
Deterministic programs deployed to a blockchain virtual machine (e.g., Ethereum's EVM) that execute on-chain based on transaction inputs, with state changes enforced by network consensus.
Turning a real-world asset (a bond, a building, a barrel of oil) into a digital token that can be traded, transferred, or used in financial transactions on a blockchain.
Representing rights to an asset (legal title, economic interest, or claim) as a blockchain token, typically backed by an off-chain custodial arrangement or legal structure that gives the token legal force.
also: Cold Storage
A wallet kept completely offline so the keys are never exposed to the internet. Used to hold assets that do not need to move often, trading day-to-day convenience for stronger security.
Keys are generated and stored on an air-gapped device or medium. Transactions are signed offline, then broadcast from a separate connected device.
also: Hosted Wallet
A digital wallet where a trusted third party such as an exchange, custodian, or bank holds the private keys and controls the assets on the owner's behalf. The user signs in with a login, and the provider can freeze, recover, or move funds. This is the model most familiar to bankers, since it mirrors how a bank holds customer deposits.
The provider, not the user, holds the signing keys. Transactions are authorized on the provider side, and account recovery is possible because the custodian retains the key material.
An entity legally responsible for holding assets on behalf of clients. In crypto, often a regulated firm (Anchorage, BitGo, Coinbase Custody) that holds private keys under institutional-grade controls.
A qualified custodian under SEC, OCC, or state trust company frameworks responsible for safekeeping client digital assets under fiduciary duty, typically employing multi-signature, HSM-based key management, and audited operational controls.
A small physical device, such as a Ledger or Trezor, that stores private keys offline and signs transactions inside the device. It keeps the keys off the user's computer or phone even while transacting.
A dedicated device that holds keys in a secure element and signs on-device, so the private key never leaves the hardware.
A wallet that stays connected to the internet for quick access and frequent transactions. Convenient for everyday use, but more exposed to attackers because the keys live on an online device.
Signing keys reside on an internet-connected system. Lower friction to transact, larger attack surface.
A third party (typically a regulated custodian like Anchorage, Fidelity Digital Assets, or Coinbase Custody) holds the keys to your digital assets on your behalf. Similar to how a bank holds your cash.
A qualified custodian arrangement where a regulated entity maintains private keys under fiduciary and operational controls (multi-sig, HSMs, SOC audits), enabling institutional participation while meeting custody rule requirements.
also: Multi-Party Computation Wallet
A wallet that splits the signing power into separate pieces held by different parties or systems, so no single person or server ever holds the whole key. Increasingly used by institutional custodians to remove single points of failure.
Uses multi-party computation so several parties jointly produce a valid signature without any one of them ever reconstructing the full private key.
also: multi-sig, multisig
A wallet that requires multiple keys (held by different people) to authorize a transaction. Like a corporate checkbook that needs two signatures. Standard institutional setup.
A signature scheme requiring m-of-n threshold signatures to authorize a transaction. Implemented as a smart contract (Gnosis Safe) or as a native chain feature (Bitcoin multi-sig, MuSig2 aggregated signatures).
also: Self-Custody Wallet, Self-Hosted Wallet
A digital wallet where the user alone holds the private keys, so no intermediary can move or freeze the funds. It offers full control and full responsibility. If the user loses the keys or recovery phrase, the assets are gone, with no help desk to call.
The user's own device holds the signing keys and the provider never takes custody. There is no server-side recovery path, so loss of the seed phrase is permanent.
The secret value that authorizes spending from a wallet and proves ownership of the assets. Whoever holds the private key controls the funds, which is the basis for the saying "not your keys, not your coins."
A large random number used to produce digital signatures. A signature proves control of the matching address without revealing the key itself.
also: Receiving Address
The shareable identifier others use to send assets to a wallet, similar in spirit to an account and routing number. It can be shared freely and reveals nothing that would let someone spend the funds.
Derived from the private key by a one-way function. Funds are sent to the address, but only the matching private key can spend them.
A regulated institution, such as a bank or trust company, that is legally authorized to hold client assets on their behalf. The term matters because investment advisers and many institutions are required to keep client assets with one.
A status defined under custody regulation, such as the SEC's custody rule. For digital assets it shapes who may legally hold tokens for clients.
also: Recovery Phrase, Mnemonic
A list of 12 to 24 ordinary words that backs up a wallet and can fully restore access to it. Anyone who reads the phrase gains complete control of the funds, so it must be protected as carefully as the keys themselves.
A human-readable encoding of the wallet's master secret, from which all of the wallet's private keys can be regenerated.
You hold your own keys. No bank, no custodian, no exchange between you and your assets. Full control, full responsibility. If you lose the keys, the assets are gone permanently.
Non-custodial key management where the asset holder personally controls the private keys, typically via hardware wallets or self-managed software. No counterparty risk; no recovery path if keys are lost.
Software (or hardware) that holds the keys controlling your blockchain assets. Despite the name, it doesn't actually store the coins. Those exist on the chain. It stores the keys that prove ownership.
A keystore for cryptographic key pairs that authorize blockchain transactions. Categorized as custodial vs. non-custodial, and hot (online) vs. cold (offline).
Two parts of a transaction settle at exactly the same moment, or neither settles at all. No leg risk: you can't be left holding one side without the other. Powerful for delivery-versus-payment on tokenized securities.
Settlement of multiple linked transfers as a single indivisible operation, typically via smart contract or chain-native primitive (HTLCs, atomic swaps). Eliminates Herstatt-style settlement risk.
Infrastructure that moves tokens or data from one blockchain to another. Different from on/off ramps, which move between fiat and crypto. Historically a major attack surface: billions stolen from bridges over the years.
A protocol that enables cross-chain transfer of tokens or messages, typically by locking the asset on the source chain and minting a wrapped representation on the destination. Trust models range from federated multi-sig to fully trustless ZK-bridged proofs.
Permanently destroying tokens by sending them to an unspendable address, which reduces total supply. Stablecoin issuers burn tokens when holders redeem them for the underlying dollar.
Removing tokens from circulation by transferring them to a provably unspendable address (typically the zero address) or via a contract function that decrements total supply.
Transactions where the amount, sender, recipient, or other details are hidden from public view but still cryptographically verifiable. Important for institutional use where transaction privacy is required even on a public chain.
Cryptographic techniques (Pedersen commitments, range proofs, ZKPs) that conceal transaction values, addresses, or asset types while allowing network participants to verify validity.
How a blockchain's participants agree on which transactions are valid and what the current state of the ledger is. Proof of Stake and Proof of Work are the two best-known mechanisms.
The protocol by which network nodes reach agreement on transaction ordering and ledger state without a central authority. Includes Nakamoto-style consensus (PoW), staking-based (PoS), and classical BFT (PBFT, Tendermint).
also: DLT
A database that's replicated across many participants instead of sitting on one server. The broader category that includes blockchains. A blockchain is one type of distributed ledger.
A consensus-driven, replicated, synchronized data store maintained across geographically dispersed nodes. Includes blockchains but also non-chain structures like DAGs.
also: L1
The base blockchain itself (Bitcoin, Ethereum, Solana). The chain that records and finalizes transactions on its own, without depending on another chain for security.
A base-layer blockchain with its own consensus mechanism, native token, and independent transaction settlement, against which Layer 2 networks may be anchored.
also: L2
A faster, cheaper network built on top of a Layer 1 (usually Ethereum) that batches up many transactions and settles them back to the base chain. Like an express lane on top of regular highway lanes.
A scaling solution that processes transactions off the main chain (Optimistic Rollups, ZK Rollups, sidechains) and posts cryptographic proofs or transaction data back to the L1 for settlement.
also: L0
The base communications and infrastructure layer that lets different blockchains connect and exchange information. The protocol that ties separate chains together rather than running its own transactions.
Cross-chain messaging or interoperability infrastructure (LayerZero Labs' protocol, Cosmos IBC, Polkadot relay chain) that enables transaction or data passage between independent Layer 1 networks.
Creating new tokens. For a payment stablecoin, this happens when someone deposits dollars with the issuer and the issuer mints an equivalent number of tokens.
Issuance of new units of a token by the contract or protocol authorized to do so, typically gated by access control (regulated stablecoins) or by protocol rules (native chain tokens).
The bridges between fiat money and crypto. An on-ramp turns dollars into crypto; an off-ramp turns crypto back into dollars. Usually involves an exchange, custodian, or stablecoin issuer.
Regulated points of conversion between fiat currency and on-chain assets, typically operated by money services businesses (MSBs), licensed exchanges, or banks providing crypto custody services.
A service that brings off-chain data (stock prices, weather, sports scores) onto the blockchain so smart contracts can use it. Without oracles, a smart contract only knows what's already on the chain.
An infrastructure service that delivers external data to smart contracts in a trust-minimized way. Implementations include decentralized oracle networks (Chainlink, Pyth) using aggregation across multiple data sources with cryptoeconomic security.
also: PoS
A consensus method where validators are chosen to confirm transactions based on how much of the network's token they've put up as collateral. Misbehavior gets their stake slashed.
A Sybil-resistance and consensus mechanism where validators are selected probabilistically based on staked token holdings. Used by Ethereum (post-Merge), Solana, Cosmos, and most modern chains.
also: PoW
A consensus method where validators ('miners') compete to solve a computationally expensive puzzle. Winner adds the next block and earns the reward. Bitcoin's mechanism. Energy-intensive by design.
Sybil-resistance via cost-based competition: miners expend computational work to find a nonce that produces a block hash meeting a difficulty target. Used by Bitcoin and a few remaining chains.
The point at which a transaction is final: recorded on the chain, no longer reversible. On a blockchain, settlement happens in seconds or minutes rather than days, with no clearing house or intermediary.
The state at which a transaction is irrevocably committed to the ledger. Finality may be probabilistic (PoW: deepens over time) or deterministic (BFT-style: immediate).
A higher tier of validator with greater responsibilities and rewards on certain networks. Often handles additional duties like governance, network coordination, or larger blocks. Network-specific concept.
An elevated validator role on networks that distinguish between validation tiers (e.g., XRPL UNL validators, certain DPoS designs), often carrying additional permissions, capital requirements, or reputational stakes.
A network participant whose job is to verify transactions and add new blocks to the chain. In Proof of Stake, validators post collateral and get rewarded for honest behavior, punished for misbehavior.
A node operating consensus participation software, typically required to post a stake of native tokens. Responsible for proposing and attesting to blocks; rewarded with protocol issuance and transaction fees, slashed for protocol violations.
also: ZKP, ZK proof
A mathematical method that lets one party prove to another that something is true (a password is known, a transaction is valid) without revealing any of the underlying information. Powerful for privacy and scaling.
A cryptographic proof system (zk-SNARKs, zk-STARKs) where a prover demonstrates knowledge of a witness without revealing the witness. Powers private payments (Zcash), scaling (ZK rollups), and identity systems.