Stablecoin Glossary — Stablecoin Beat

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Stablecoin Glossary 35 terms

Algorithmic Stablecoin

An algorithmic stablecoin relies materially on protocol rules and economic incentives that adjust supply, demand, or linked-token balances in an effort to keep the stablecoin near its reference value.

Arbitrage Mechanism

A stablecoin arbitrage mechanism is the set of trading and conversion opportunities that allows market participants to profit from price differences between the stablecoin's market price and its reference or redemption value.

In stablecoin reporting, an attestation is an independent practitioner's assurance engagement on specified information, such as reserve balances or the relationship between reserves and tokens outstanding, under a defined scope and reporting date or period.

An audit is an independent examination of financial statements under applicable auditing standards that results in an auditor's opinion on whether those statements are fairly presented under the relevant accounting framework.

Collateral Liquidation

Collateral liquidation is the execution of a sale, transfer, or seizure of pledged collateral after a collateralized stablecoin position breaches the conditions defined by the protocol.

Collateral Ratio

A collateral ratio is the value of collateral relative to the value of the stablecoin debt or claims supported by that collateral, usually expressed as a percentage.

Crypto-Collateralized Stablecoin

A crypto-collateralized stablecoin is issued against crypto assets pledged or locked as collateral, usually through smart contracts and usually with collateral worth more than the stablecoins created.

A custodian bank is a regulated banking institution that safeguards financial assets or cash on behalf of a client, which can include assets forming part of a stablecoin reserve.

Depegging is a material deviation of a stablecoin's market price from its stated reference value or target exchange relationship.

Fiat-Backed Stablecoin

A fiat-backed stablecoin is a stablecoin that references a fiat currency and is backed by a reserve portfolio intended to support redemption at the target value.

Liquidation Mechanism

A liquidation mechanism is the set of protocol rules and procedures used to reduce or close an undercollateralized stablecoin position when its collateral ratio falls below a defined threshold.

Liquidity risk is the risk that a stablecoin issuer, redemption mechanism, reserve portfolio, or trading market cannot meet expected flows without material delay, loss, or price impact.

Market Confidence

Market confidence is the degree to which users and market participants expect a stablecoin to preserve its reference value and remain transferable or redeemable under expected conditions.

Overcollateralization

Overcollateralization is a structure in which the value of assets supporting an obligation exceeds the value of the stablecoins or redemption claims issued against them.

Peg Maintenance

Peg maintenance is the set of mechanisms and market incentives used to keep a stablecoin's market value close to its target reference value.

Price Stability

In the stablecoin context, price stability is the extent to which a stablecoin's market price remains close to its stated reference value over time.

Redemption is the process through which a holder with access to the redemption mechanism exchanges stablecoins for the assets or value specified by the arrangement, typically at or near the target value.

Reserve assets are assets held within a stablecoin arrangement to support the value of outstanding tokens and the issuer's ability to meet redemption obligations.

Reserve Composition

Reserve composition is the mix and relative share of asset types held in a stablecoin's reserve portfolio.

Reserve Management

Reserve management is the governance and operational process used to invest, value, safeguard, monitor, and liquidate the assets backing a stablecoin.

Reserve Transparency

Reserve transparency is the disclosure of information that allows users, regulators, and other stakeholders to evaluate the assets supporting a reserve-backed stablecoin.

Run risk is the risk that many stablecoin holders seek to redeem or sell at the same time because they fear that waiting could leave them with a lower-value or less-liquid claim.

Stability Mechanism

A stability mechanism is the set of financial, economic, and technical features intended to minimize fluctuations in a stablecoin's market value relative to its peg.

A stablecoin is a crypto asset designed to maintain a stable value relative to a specified asset, unit of account, or pool or basket of assets. Its stabilization mechanism can rely on reserve assets, collateral, redemption, market incentives, protocol rules, or a combination of these features.

Stablecoin Burning

Stablecoin burning is the technical destruction or permanent removal of stablecoin tokens from the spendable token supply on a blockchain or distributed ledger.

Stablecoin Collateral

Stablecoin collateral consists of assets pledged or locked to support the issuance and solvency of a collateralized stablecoin arrangement.

Stablecoin Governance

Stablecoin governance is the framework of authority, decision rights, controls, and accountability used to operate and change a stablecoin arrangement.

Stablecoin Issuer

A stablecoin issuer is the legal entity responsible for issuing a stablecoin where the arrangement has an identifiable issuer. Its responsibilities can include minting, redemption, reserve management, disclosures, governance, and oversight of service providers.

Stablecoin Liquidity

Stablecoin liquidity is the ease with which a stablecoin can be bought, sold, or converted at or near its reference value in the required size and time frame.

Stablecoin Market Capitalization

Stablecoin market capitalization is the market value of a stablecoin's measured circulating supply, generally calculated as the relevant supply measure multiplied by the token's market price.

Stablecoin Minting

Stablecoin minting is the technical creation of new stablecoin tokens on a blockchain or distributed ledger.

A stablecoin peg is the target exchange relationship between a stablecoin and its specified reference asset, unit of account, or basket. A dollar-referenced stablecoin targeting one dollar has a 1:1 peg to the US dollar.

Stablecoin Regulation

Stablecoin regulation is the body of laws, regulations, licensing requirements, prudential rules, conduct standards, and supervisory expectations applied to stablecoin issuers and related arrangements.

Stablecoin Supply

Stablecoin supply is the quantity of stablecoin units outstanding under a specified measurement convention at a given time.

Supply Adjustment

Supply adjustment is a change in the number of stablecoin units outstanding that occurs through issuance, redemption, rebasing, burning, or protocol rules intended to respond to demand or price conditions.

Stablecoin Payments Glossary 42 terms

Address Whitelisting

Address whitelisting is a control that restricts withdrawals or transfers to blockchain addresses that have been approved in advance.

Blockchain Address

A blockchain address is a network-specific identifier used as a source, destination, account, or script reference in blockchain transactions.

Checkout Integration

Checkout integration embeds a stablecoin payment option into the customer-facing process used to complete an online, in-app, or other digital purchase.

Compliance Controls

Compliance controls are policies, procedures, systems, and restrictions used by a regulated entity to meet applicable legal and regulatory obligations.

Counterparty Risk

Counterparty risk is the risk that a party to a transaction or financial arrangement fails to meet its contractual or financial obligations.

Cross-Border Payments

Cross-border payments are payments in which the payer and payee are located in different jurisdictions or in which the payment flow crosses national payment, banking, or currency systems.

Custodial Wallet

A custodial wallet is a wallet arrangement in which a third-party service provider controls or administers the private keys or signing authority used to move a user's digital assets.

A digital wallet is software or hardware that manages the cryptographic credentials used to control digital assets and enables users to create, sign, and submit transactions.

An escrow payment is a payment arrangement in which funds are placed under agreed control and released to the beneficiary only after specified conditions are met.

Exchange Rate Lock

An exchange rate lock is a time-limited commitment by a provider to honor a quoted conversion rate for a specified payment or exchange if the stated conditions are met.

Fiat Conversion

Fiat conversion is the exchange of a stablecoin or other digital asset for sovereign currency, or the exchange of sovereign currency for a digital asset.

Foreign Exchange Conversion

Foreign exchange conversion is the exchange of value denominated in one currency for value denominated in another currency at an agreed or quoted exchange rate.

Internal Ledger Transfer

An internal ledger transfer is a movement of value recorded within an intermediary's own accounting system without an immediate transfer on the underlying public blockchain.

Invoice Generation

Invoice generation is the creation of a record or payment document that states the amount owed, the payment terms, and the information required to settle the obligation.

Liquidity Provider

A liquidity provider supplies assets or executable quotes that allow other market participants or payment services to buy, sell, or convert value.

A mempool is a node's local collection of valid or potentially valid transactions that have been received but have not yet been included in the blockchain.

Merchant Acceptance

Merchant acceptance is the ability and willingness of a merchant to receive a specified payment instrument, including a stablecoin, in exchange for goods or services.

Merchant Settlement

Merchant settlement is the transfer of payment proceeds to the merchant after a customer transaction has been accepted and processed.

Off-Chain Settlement

Off-chain settlement is the completion of a transfer or obligation on a ledger or system that is not the public blockchain on which the stablecoin itself is issued.

On-Chain Settlement

In StablecoinBeat usage, on-chain settlement is the point at which a blockchain or distributed ledger reflects a stablecoin transfer as technically settled under that system's rules.

An on-ramp converts fiat money or another conventional payment instrument into digital assets, while an off-ramp converts digital assets into fiat money or another conventional form of funds.

A payment API is a software interface that allows an application to programmatically request, initiate, query, or manage payment functions.

Payment Authorization

Payment authorization is the approval that permits a payment instruction or transfer to proceed under the rules of the relevant account, wallet, or payment system.

Payment Finality

Payment finality is the legally recognized point at which a transfer of an asset or the discharge of an obligation becomes irrevocable and unconditional under the applicable rules and legal framework.

Payment Gateway

A payment gateway is the software interface through which a merchant or application sends and receives payment information to and from payment-processing infrastructure.

Payment Processor

A payment processor is a service provider that performs or coordinates transaction-processing functions between a payer, merchant, financial institution, or settlement system.

Payment Request

A payment request is a structured message specifying the information a payer needs to complete a payment, such as the amount, asset, destination, network, reference, or expiration time.

Point-of-Sale Integration

Point-of-sale integration connects stablecoin payment functionality to the hardware or software a merchant uses to calculate, present, authorize, and record a customer purchase.

A private key is secret cryptographic data used to create digital signatures that authorize transactions or prove control of blockchain credentials.

Programmable Payments

Programmable payments are payment instructions or settlement processes in which software executes, routes, or releases funds when predefined conditions are satisfied.

A public key is cryptographic data mathematically linked to a private key and used to verify digital signatures.

QR Code Payment

A QR code payment uses a machine-readable two-dimensional code to convey payment information that a customer's device or wallet can scan.

Recurring Payments

Recurring payments are payments initiated repeatedly according to a schedule or ongoing commercial arrangement, such as a subscription, membership, or installment plan.

Remittances are cross-border person-to-person transfers, commonly sent by migrants or other individuals to family members or households in another country.

Self-custody is an arrangement in which the user directly controls the private keys or other signing credentials needed to authorize transfers of digital assets.

Settlement Risk

Settlement risk is the risk that settlement does not occur as expected, exposing a party to loss after it has already performed or become obligated to perform its side of a transaction.

Stablecoin Payments

A stablecoin payment is a transfer of value in which a stablecoin is used as the payment or settlement asset between parties.

Subscription Billing

Subscription billing is the commercial process used to calculate, schedule, collect, reconcile, and manage recurring charges for an ongoing product or service.

Transaction Confirmation

Transaction confirmation is evidence that a blockchain transaction has been accepted into the ledger and, depending on the network, has received additional blocks, votes, or attestations that increase confidence in its persistence.

Transaction Monitoring

Transaction monitoring is the ongoing analysis of payment activity to identify patterns, counterparties, or events that may require investigation under an institution's compliance and risk framework.

Treasury Payments

Treasury payments are transfers initiated by a business or institution to manage corporate cash, liquidity, obligations, or funding across accounts, entities, suppliers, or financial counterparties.

Webhook Notification

A webhook notification is an event-triggered HTTP message sent by one software system to a preconfigured endpoint in another system.

Tokenized Money Glossary 15 terms

Central Bank Digital Currency

A central bank digital currency, or CBDC, is a digital payment instrument denominated in the national unit of account and issued as a direct liability of the central bank.

Central Bank Money

Central bank money is money that is a direct liability of a central bank. It includes central bank-issued banknotes and reserve or settlement balances held by eligible institutions, and it can also include a central bank digital currency.

Commercial Bank Money

Commercial bank money consists primarily of deposit liabilities issued by commercial banks and used by households and businesses to make payments and hold monetary balances.

Digital Bearer Instrument

A digital bearer instrument is a transferable digital claim that can circulate from holder to holder without requiring the issuer to update an account for each transfer.

Digital Currency

Digital currency is a broad term for monetary value or money-like claims represented and transferred electronically.

Digital Settlement Asset

A digital settlement asset is a digitally represented asset used to discharge payment, securities, foreign-exchange, or other financial obligations on a digital platform.

Monetary Liability

A monetary liability is an obligation of an issuer that functions as money or as a redeemable monetary claim for its holder.

Programmable Money

Programmable money is digital money whose units carry conditions on their use, such as restrictions on eligible goods, recipients, locations, or time periods.

Programmable Settlement

Programmable settlement is the use of software-defined rules to coordinate or execute settlement when specified conditions are satisfied.

A retail central bank digital currency is a digital central bank liability designed for use by the general public in everyday payments and monetary holdings.

A synthetic CBDC is a policy model in which private institutions issue digital money that is fully backed by central bank reserves or another direct claim on central bank money.

Tokenized Deposit

A tokenized deposit is a commercial bank deposit liability recorded on a tokenized or programmable ledger. The depositor's claim remains a claim on the issuing commercial bank.

Tokenized Financial Asset

A tokenized financial asset is a financial asset or claim represented on a programmable digital ledger in tokenized form.

Tokenized Money

Tokenized money refers to money or monetary claims represented on a digital ledger in tokenized form, often with programmable transfer and settlement functionality.

A wholesale central bank digital currency is a digital central bank liability designed for use by eligible financial institutions in interbank, securities, or other wholesale settlement.

Stablecoin Infrastructure Glossary 15 terms

A blockchain is a type of distributed ledger in which transaction records are grouped into ordered data structures, commonly called blocks, and linked through cryptographic references according to the network's consensus rules.

Blockchain Bridge

A blockchain bridge is a protocol or service that communicates asset or state information between otherwise separate blockchain networks and enables corresponding value or messages to be represented or acted on across them.

Consensus Mechanism

A consensus mechanism is the protocol through which distributed network participants agree on valid transactions, ordering, and the authoritative state of a blockchain or distributed ledger.

Decentralized Finance

Decentralized finance, or DeFi, refers to financial services delivered through blockchain-based applications and smart contracts, with substantial parts of transaction execution governed by software.

Distributed Ledger Technology

Distributed ledger technology, or DLT, is a set of technologies that allow multiple nodes or participants to share, synchronize, and update a common ledger under agreed rules.

Gas fees are transaction charges paid for computation, data storage, or other use of network resources on blockchains that use a gas-based fee model.

Interoperability

Interoperability is the ability of separate blockchain, ledger, or payment systems to exchange information, assets, or transaction state in a coordinated and reliable way.

Layer 1 Blockchain

A Layer 1 blockchain is the base blockchain protocol that maintains its own consensus, ledger state, transaction ordering, and native settlement rules.

Layer 2 Scaling

Layer 2 scaling refers to protocols built on top of a base blockchain that process or aggregate transactions with less direct Layer 1 work while relying on the base chain for specified security, settlement, data, or dispute functions.

A node is a computer or software process that participates in a blockchain or distributed ledger network by performing one or more functions such as receiving, verifying, storing, or relaying transactions and ledger data.

A blockchain oracle is a mechanism that supplies smart contracts with data or computation originating outside the blockchain's native state.

Proof of stake is a family of blockchain consensus mechanisms in which participants' eligibility or influence in proposing, validating, or attesting to blocks is tied to cryptocurrency or other value committed as stake.

Proof of work is a family of blockchain consensus mechanisms in which participants expend computational effort to compete for the right to propose blocks and extend the accepted transaction history.

A smart contract is program code deployed to a blockchain or distributed ledger that changes ledger state according to predefined rules when it is invoked and the required conditions are satisfied.

A validator is a network participant with a defined role in verifying and contributing to consensus on transactions, blocks, or ledger state.