Stablecoin Glossary

LUMx OFFICIAL

Essential terms for understanding the logic and impact of stablecoins, the digital currencies that are redesigning the global financial infrastructure. Clear definitions in an objective reference tool for those seeking clarity on an increasingly strategic issue for the digital economy.

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A

B

C

D

E

F

G

H

I

J

K

L

M

N

O

P

Q

R

S

T

U

V

W

X

Y

Z

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24/7 Payments

The ability to send and receive payments at any time, day or night, including weekends and holidays, often enabled by blockchain or real-time payment networks.

24/7 Treasury

The capability of treasury operations (managing funds, liquidity, payments) to function continuously, 24 hours a day, 7 days a week, often enabled by blockchain technology.

A

Abstraction Layer

A way of hiding the working details of a subsystem, allowing the separation of concerns to facilitate interoperability and platform independence. In crypto, it can simplify interactions with complex blockchain protocols.

Algorithmic Stablecoin

A type of stablecoin that maintains its peg through algorithms that automatically adjust the token supply based on demand, without direct fiat or commodity collateral.

AML (Anti-Money Laundering)

A set of laws, regulations, and procedures intended to prevent criminals from disguising illegally obtained funds as legitimate income.

Asset Tokenization

A general term for representing any asset (real world or financial) as a digital token on a blockchain.

Automated Compliance

The use of technology (like AI and smart contracts) to automatically monitor transactions and enforce compliance rules, reducing manual effort and errors.

B

Backoffice

A traditional type of cryptocurrency exchange operated by a central company that manages order books, holds user funds (custody), and facilitates trades.

Bank Domicile

The primary location or jurisdiction where a bank account is held or where a banking institution is registered.

Banking Infrastructure

The collective systems, institutions, regulations, and technologies that underpin the operations of the banking sector.

Blacklist

A security feature where specific addresses or users identified as malicious or non-compliant are blocked from interacting with a smart contract, wallet, or platform.

Blockchain

A distributed, immutable, and transparent digital ledger used to record transactions across many computers.

Blockchain Credit

Lending and borrowing activities that occur directly on a blockchain, often using smart contracts and collateralized by crypto assets.

Blockchain Infrastructure

The foundational components of blockchain technology, including the network protocols, consensus mechanisms, nodes, wallets, and smart contract platforms.

Blockchain Network

The distributed system of computers (nodes) that maintain and validate the blockchain ledger according to a specific protocol (e.g., Ethereum network, Bitcoin network).

Bridge

A technology protocol that enables the transfer of tokens or data between two different blockchain networks.

Bridge Risk

Security vulnerabilities associated with cross-chain bridges, which can be targets for exploits, potentially leading to loss of funds locked or transferred via the bridge.

Burning

The process of permanently removing cryptocurrency tokens from circulation, often occurring when stablecoins are redeemed for their underlying collateral.

C

CBDC (Central Bank Digital Currency)

A digital form of a country's fiat currency, issued and backed by the central bank.

CEX (Centralized Exchange)

A traditional type of cryptocurrency exchange operated by a central company that manages order books, holds user funds (custody), and facilitates trades.

Chargeback

A demand by a credit card provider for a retailer to make good the loss on a fraudulent or disputed transaction. Largely absent in irreversible blockchain transactions.

Collateral Reserve

The pool of assets specifically designated to back the value of issued tokens, such as stablecoins or tokenized assets.

Collateralized Stablecoin

A stablecoin backed by reserve assets (like fiat currency, commodities, or other cryptocurrencies) to maintain its price stability.

Compliance

Adherence to laws, regulations, standards, and internal policies relevant to a business's operations, particularly in finance and crypto.

Continuous Audit

An automated auditing process that provides real-time or near-real-time assurance on financial data, controls, or compliance, often leveraging blockchain's transparency.

Corporate Stablecoin

A stablecoin issued or utilized primarily by a corporation for internal treasury management, B2B payments, or specific business processes.

Counterparty Risk

The risk that the other party in an agreement or transaction will not fulfill its obligations (e.g., fail to deliver assets or make payments).

Credit Tokenization

Similar to debt tokenization, representing credit lines or lending agreements as blockchain tokens.

Cross-border Payment

A transaction where the payer and the recipient are based in separate countries, often involving currency exchange.

Cross-chain

Relating to the ability to transfer assets or data between different, independent blockchain networks.

Custodial Wallet

A crypto wallet where a third party (like an exchange) holds and manages the user's private keys. Offers convenience but less user control.

Custody

The holding and safekeeping of assets on behalf of others. In crypto, it refers to securing the private keys needed to access and control digital assets.

D

Debt Tokenization

The process of representing debt instruments (like bonds or loans) as digital tokens on a blockchain, potentially improving liquidity and accessibility.

Decentralized Stablecoin

A stablecoin typically collateralized by other cryptocurrencies and managed through decentralized governance mechanisms and smart contracts, aiming to reduce reliance on central entities.

DEX (Decentralized Exchange)

A type of cryptocurrency exchange that allows for direct peer-to-peer transactions without the need for a central intermediary to hold funds or manage order books, often using automated market makers (AMMs).

DEX Aggregator

A platform that sources liquidity from multiple decentralized exchanges (DEXs) to find the best possible trading prices and lowest slippage for users.

Digital Fiat

A broad term that can encompass CBDCs or fiat-backed stablecoins, representing traditional currency in a digital format.

Disintermediation

The removal of intermediaries (like banks or brokers) from a process or transaction, often facilitated by peer-to-peer technologies like blockchain.

Dynamic Gas Fee

Gas fees that fluctuate based on network congestion; higher demand for block space leads to higher fees.

F

FedWire

A real-time gross settlement funds transfer system operated by the United States Federal Reserve Banks, used for large-value domestic transfers.

Fiat Off-ramp

Synonym for Off-ramp; a service allowing conversion of crypto back to traditional fiat currency.

Fiat-backed Stablecoin

A specific type of collateralized stablecoin where the reserves are held in traditional fiat currency (e.g., USD, EUR) in audited bank accounts.

Financial Infrastructure

The underlying systems, institutions, and technologies that facilitate financial activities like payments, lending, borrowing, and trading.

Fraud

Wrongful or criminal deception intended to result in financial or personal gain. In crypto, this can include scams, phishing, and rug pulls.

Friction Cost

The costs associated with executing a transaction, including explicit fees (like commissions or gas fees) and implicit costs (like delays, complexity, or opportunity costs).

FX (Foreign Exchange)

The trading of one currency for another. It's one of the most actively traded markets in the world.

FX Spread

The difference between the bid (buy) price and the ask (sell) price for a currency pair in the foreign exchange market. Represents a cost of transaction.

G

Gas Fee

A fee paid by users to compensate for the computing energy required to process and validate transactions on a blockchain network.

Global Distribution

The ability for a product, service, or asset (like a stablecoin) to be accessed and used by individuals and businesses worldwide, often facilitated by the borderless nature of blockchain.

Governance Token

A type of token that grants holders voting rights or influence over the future development and parameters of a decentralized protocol or application.

I

Independent Auditor

A certified third-party firm that examines an organization's financial statements or reserves to provide an objective opinion on their fairness and accuracy.

Instant FX / Instant Exchange

Foreign exchange transactions that occur almost immediately, often facilitated by stablecoins or blockchain platforms, reducing settlement times compared to traditional FX.

Interoperability

The ability of different systems, devices, applications, or blockchains to connect and communicate in a coordinated way, without special effort from the user.

Irreversible Transaction

A characteristic of most blockchain transactions; once confirmed on the ledger, they cannot be easily reversed or altered, unlike traditional bank transfers which may allow chargebacks.

K

KYC (Know Your Customer)

Regulatory requirement for financial institutions and related services to verify the identity of their customers to prevent fraud, money laundering, and other illicit activities.

KYT (Know Your Transaction)

The practice of monitoring cryptocurrency transactions to identify and assess potential risks related to money laundering, terrorist financing, or other illicit activities.

L

Liquidity

The ease with which an asset, or security, can be converted into ready cash without affecting its market price. In crypto, it refers to the ability to buy or sell a token quickly at a stable price.

Liquidity KPI (Key Performance Indicator)

Specific metrics used to measure and track the liquidity of an asset or market, such as trading volume, bid-ask spread, or market depth.

Liquidity Pool

A collection of crypto tokens locked in a smart contract, used to facilitate trading on decentralized exchanges (DEXs) by providing liquidity for swaps.

Liquidity Risk

The risk that an entity cannot meet its short-term financial demands or cannot sell an asset quickly without incurring a significant loss in value.

Local Liquidity

The availability of buyers and sellers for a specific asset (like a stablecoin) within a particular geographic region or specific trading pair/platform.

M

Market Risk

The risk of losses in positions arising from movements in market prices (e.g., changes in interest rates, exchange rates, or asset prices).

Micropayment

A very small financial transaction, often fractions of a cent. Blockchain technology can potentially make micropayments more feasible by reducing transaction costs.

Minting

The process of creating new cryptocurrency tokens, especially stablecoins, typically triggered when users deposit the corresponding collateral.

Multisig (Multi-signature)

A type of digital signature that requires multiple private keys (approvals) to authorize a transaction, enhancing security by distributing control.

N

Native Token

The primary cryptocurrency associated with a specific blockchain network, often used for paying gas fees, participating in governance, or staking (e.g., ETH on Ethereum, SOL on Solana).

Non-custodial Wallet

A crypto wallet where the user has sole control over their private keys and, therefore, full control over their funds. Offers more security and autonomy but requires user responsibility.

O

Off-ramp

A service or platform that allows users to convert cryptocurrency back into traditional fiat currency.

On-chain Audit

The process of verifying transactions and balances directly on the blockchain ledger, providing transparency and immutability for audit purposes.

On-chain Fiat

Fiat currency represented as a token on a blockchain (essentially a fiat-backed stablecoin), allowing fiat value to be transferred and used within blockchain ecosystems.

On-ramp

A service or platform that allows users to convert traditional fiat currency (like USD, EUR, BRL) into cryptocurrency.

Operational Risk

The risk of loss resulting from inadequate or failed internal processes, people, systems, or from external events (e.g., fraud, system failures, legal issues).

Overcollateralization

Providing collateral that is worth more than the value of the loan or asset being backed. Common in decentralized stablecoins (e.g., depositing $150 worth of ETH to mint $100 of stablecoin).

P

Payment Corridors

Specific routes or channels used for transferring funds between two locations or currencies, particularly relevant in cross-border payments.

Payment Cycle

The complete sequence of steps involved in making a payment, from initiation by the payer to final settlement and availability of funds to the recipient.

Payment Gateway

A technology service used by merchants to accept debit or credit card payments, acting as an interface between a merchant's website/POS and the financial institutions involved.

Payment Orchestrator

A platform or software layer that integrates and manages multiple payment gateways, providers, and methods to optimize payment flows and success rates.

Payment Order

An instruction from a payer to their payment service provider (like a bank or crypto platform) to transfer funds to a recipient.

Payment Routing

The process of selecting the most efficient or cost-effective path for a payment transaction to travel from the sender to the receiver, often involving multiple intermediaries or networks.

Payment Tokenization

Representing a payment obligation or instruction as a digital token on a blockchain, potentially streamlining payment processing and settlement.

Permissioned Network

A blockchain network where access to participate (e.g., validate transactions, view data) is restricted to authorized entities. Often used in enterprise settings.

Programmability

The ability to embed automated logic and rules directly into financial instruments or processes, often via smart contracts on a blockchain.

Proof of Reserve

A verifiable audit method, often using on-chain data and third-party attestations, to demonstrate that a custodian (like a stablecoin issuer or exchange) holds sufficient assets to back the liabilities it owes to its users.

Protocol Interoperability

The ability for different blockchain protocols or smart contract standards to interact and exchange information or value seamlessly.

Public Network

A blockchain network (like Bitcoin or Ethereum) that is open for anyone to join, participate in consensus, view transactions, and build applications. Also called permissionless.

Public Stablecoin

A stablecoin designed for general use by the public on permissionless blockchains, accessible to anyone.

R

Receivables Tokenization

The process of converting future income streams (accounts receivable) into digital tokens that can be sold or financed on a blockchain.

Reconciliation

The process of comparing two sets of records (e.g., internal accounts and bank statements, or on-chain and off-chain data) to ensure they match and identify any discrepancies.

RWA (Real World Assets)

Tangible or intangible assets from the traditional financial world (like real estate, bonds, commodities, invoices) that are represented as tokens on a blockchain.

S

Sanctions

Penalties or restrictions imposed by governments or international bodies on countries, entities, or individuals, often prohibiting financial transactions with them. Compliance systems screen against sanctions lists.

Secure Custody

Practices and technologies designed to protect digital assets (private keys) from theft, loss, or unauthorized access.

Settlement Finality

The point at which a transaction is considered complete and irreversible, meaning the transfer of value is legally and practically final. Blockchain offers faster finality than many traditional systems.

Settlement Infrastructure

The systems, networks, and processes used to finalize transactions, involving the transfer of assets and funds between parties.

Settlement Time

The duration it takes for a transaction to achieve settlement finality, from initiation to the point where funds are irrevocably transferred and available to the recipient.

Shared Ledger

A distributed ledger (like a blockchain) that is accessible and maintained by multiple participants in a network, providing a common, trusted record of transactions.

Smart Contract

A self-executing contract with the terms of the agreement directly written into code. They run on a blockchain, automating actions when predefined conditions are met.

Smart Routing

An advanced form of payment routing that uses algorithms and real-time data to determine the optimal path for a transaction based on factors like cost, speed, success rate, and liquidity.

Stability Mechanism

The specific methods used by a stablecoin protocol to maintain its peg to the target value (e.g., reserve management, algorithmic supply adjustments, arbitrage incentives).

Stablecoin

A type of cryptocurrency designed to maintain a stable value, typically pegged to a fiat currency (like the US dollar), a commodity, or another financial instrument.

Stablecoin Regulation

Laws, rules, and guidelines established by governments and regulatory bodies to oversee the issuance, management, and use of stablecoins, addressing risks related to financial stability, consumer protection, and illicit finance.

Standard Token / Token Standard

A set of rules and specifications defined on a blockchain (like ERC-20 on Ethereum) that allows tokens to be easily created, interoperable, and compatible with wallets and exchanges.

Swap

In crypto, typically refers to exchanging one cryptocurrency for another, often performed on a DEX or CEX.

SWIFT

A global messaging network used by financial institutions to securely transmit information and instructions for international money transfers.

Systemic Risk

The risk of collapse of an entire financial system or market, as opposed to risk associated with any one individual entity, group or component.

T

Token Redemption

The process of exchanging a token back for its underlying value or asset, particularly relevant for stablecoins (redeeming for fiat) or tokenized assets.

Tokenization

The process of representing real-world assets (like real estate, art, or commodities) or rights as digital tokens on a blockchain.

Tokenized Fiat

Synonym for On-chain Fiat or Fiat-backed Stablecoin; traditional currency represented as a blockchain token.

Traditional Banking System

The established network of commercial banks, central banks, payment systems (like SWIFT, ACH), and regulations that facilitate conventional financial services.

Traditional Infrastructure

Refers to the established financial systems and networks, such as SWIFT, ACH, FedWire, and correspondent banking relationships.

Transaction Monitoring

The ongoing process of reviewing financial transactions for suspicious activity, compliance breaches, or risk indicators, often required by AML/KYT regulations.

Transparency

The extent to which information about an organization's operations, finances, or (in crypto) on-chain activities is readily available and understandable to stakeholders.

Treasury Management

The management of a company's holdings, with the ultimate goal of managing the firm's liquidity, mitigating its operational, financial and reputational risk.

Treasury Reserve

Assets held by a stablecoin issuer or other entity, often composed of highly liquid, low-risk assets like cash and short-term government debt (Treasuries).

Treasury Token

A digital token representing ownership or claim on assets held in a treasury, potentially including tokenized government bonds or stablecoins backed by such assets.

Treasury Yield

The return on investment generated from holding government debt securities, such as US Treasury bills, notes, or bonds.

U

Underwriting

The process used by lenders and insurers to assess the eligibility and risk of a potential client (borrower or insured) before approving a loan or policy.

US Treasury

Refers to the United States Department of the Treasury or, more commonly in finance, the debt securities (like T-bills, notes, bonds) issued by it.

Utility Token

A type of token that grants users access to a product or service within a specific blockchain ecosystem (e.g., paying for computation, accessing features).

V

Volatility

The degree of variation of a trading price series over time, measured by the standard deviation of logarithmic returns. High volatility means price can change dramatically over a short period.

W

Wallet

A digital tool (software or hardware) used to store, send, and receive cryptocurrencies by managing public and private keys.

Whitelist

A security feature where only pre-approved addresses or users are permitted to interact with a smart contract, wallet, or platform.

Y

Yield

The income return on an investment, such as interest or dividends. In DeFi, it often refers to earning rewards by providing liquidity, staking, or lending crypto assets.