Core concepts in stablecoin design, reserve mechanics, collateralization, peg maintenance, regulation, and stability mechanisms.
| Term | Definition |
|---|---|
| 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. |
| Attestation | 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. |
| Audit | 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. |
| Custodian Bank | 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 | 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 | 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 | 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 | 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 | 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. |
| Stablecoin | 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. |
| Stablecoin Peg | 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. |