Stablecoin Glossary

Algorithmic Stablecoin

An algorithmic stablecoin maintains price stability through automated supply adjustments rather than reserve backing.

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Arbitrage Mechanism

An arbitrage mechanism refers to market incentives that encourage traders to restore a stablecoin's price to its target peg.

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Attestation

An attestation is an independent verification of reserve balances at a specific point in time.

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Audit

An audit is a comprehensive independent review of financial statements and reserve holdings.

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Collateral Liquidation

Collateral liquidation is the forced sale of pledged assets when collateral values fall below required thresholds.

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Collateral Ratio

The collateral ratio is the proportion of collateral required to support stablecoin issuance.

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Crypto-Collateralized Stablecoin

A crypto-collateralized stablecoin is backed by cryptocurrency collateral locked in smart contracts.

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Custodian Bank

A custodian bank is a financial institution responsible for holding reserve assets on behalf of a stablecoin issuer.

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Depegging

Depegging occurs when a stablecoin's price diverges from its target value.

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Fiat-Backed Stablecoin

A fiat-backed stablecoin is a stablecoin supported by reserves denominated in a sovereign currency.

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Liquidation Mechanism

A liquidation mechanism sells collateral automatically when its value falls below required thresholds.

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Liquidity Risk

Liquidity risk is the possibility that an issuer cannot meet redemption requests quickly.

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Market Confidence

Market confidence refers to trust in the stability and redeemability of a stablecoin.

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Overcollateralization

Overcollateralization occurs when collateral value exceeds the value of issued stablecoins.

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Peg Maintenance

Peg maintenance refers to the economic and technical mechanisms used to keep a stablecoin's price aligned with its reference asset.

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Price Stability

Price stability refers to the ability of a stablecoin to maintain a consistent value.

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Redemption

Redemption is the process through which stablecoins are exchanged for the underlying reference asset.

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Reserve Assets

Reserve assets are financial instruments held to support the value of issued stablecoins.

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Reserve Composition

Reserve composition refers to the types of assets used to back a stablecoin's circulating supply.

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Reserve Management

Reserve management refers to the policies and practices used by stablecoin issuers to manage backing assets.

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Reserve Transparency

Reserve transparency refers to public disclosure of assets backing a stablecoin.

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Run Risk

Run risk refers to the possibility that many holders redeem stablecoins simultaneously.

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Stability Mechanism

A stability mechanism is the set of economic or technical processes used to maintain a stablecoin's target value.

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Stablecoin

A stablecoin is a digital token designed to maintain a stable value relative to a reference asset such as a fiat currency.

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Stablecoin Burning

Stablecoin burning is the permanent removal of tokens from circulation.

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Stablecoin Collateral

Stablecoin collateral refers to assets pledged or locked to support the issuance of stablecoins.

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Stablecoin Governance

Stablecoin governance refers to the rules and decision-making structures that control a stablecoin system.

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Stablecoin Issuer

A stablecoin issuer is the entity responsible for creating and managing stablecoins.

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Stablecoin Liquidity

Stablecoin liquidity refers to the ease with which stablecoins can be traded or redeemed without affecting market price.

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Stablecoin Market Capitalization

Stablecoin market capitalization is the total value of all circulating stablecoins.

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Stablecoin Minting

Stablecoin minting is the creation of new stablecoin tokens by an issuer or protocol.

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Stablecoin Peg

A stablecoin peg is the mechanism used to maintain a stablecoin's value relative to a reference asset.

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Stablecoin Regulation

Stablecoin regulation refers to legal and supervisory frameworks governing stablecoin issuance and use.

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Stablecoin Supply

Stablecoin supply refers to the total number of stablecoin tokens currently circulating in the market.

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Supply Adjustment

Supply adjustment refers to mechanisms that change token supply to maintain the peg.

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