Glossary

This glossary sets out a (non-exhaustive) list of terms used in the report. The definitions are based primarilyon previous reports by international organizations and standard-setting bodies.

Asset-backed token

A crypto asset that represents an interest in a physical asset.

Blockchain

A form of distributed ledger in which details of transactions are held in the ledger in the formof blocks of information. A block of new information is attached into the chain of pre-existing blocks via acomputerized process by which transactions are validated.

Bridge

A technique used to transfer crypto assets between ecosystems by, typically, creating a syntheticrepresentation of a blockchain-specific crypto asset on a different blockchain.

Centralized exchange (CEX)

A crypto asset trading platform that facilitates the buying and selling ofcrypto assets, either for fiat currencies or for another digital asset. The platform functions as anintermediary and sometimes provides custody and other services.

Centralized finance (CeFi)

Centralised intermediaries (for example lending or trading platforms) withinthe crypto ecosystem that purport to offer some of the features of DeFi with some of the ease of use andsecurity of traditional financial services products.

Compos ability

the ability to reuse existing software components to build new applications. The cryptoindustry refers to compos ability as akin to Lego blocks. Each block can be combined with another, allowingdevelopers to build complex structures by combining different blocks.

Consensus mechanism

In DLT applications, the process by which validators agree on the state of adistributed ledger.

Crypto asset

A type of private sector digital asset that is expressed primarily through cryptography anddistributed ledger or similar technology.

Cryptoisation

The risk of local currency substitution with crypto assets, most likely dollar-denominatedstable coins. This is a particular risk for countries with unstable currencies and weak monetary frameworks.

Decentralised autonomous organization (DAO)

In theory, a decentralized application consisting ofrules of operation that dictates who can execute certainbehavior or make an upgrade. Code helps createan organizational structure intended to function without a centralized management structure.

Decentralized applications (DApps)

DeFi applications offering services such as lending or trading,predominantly between crypto assets including stable coins.

Decentralized exchange (DEX)

Marketplaces built using distributed ledger or similar technology whereTransactions can occur directly between crypto asset traders.

Decentralised finance (DeFi)

A set of alternative financial markets, products and systems that operateusing crypto assets and smart contracts (software) built using distributed ledger or similar technology.

DeFi protocol

A specialized system of rules that creates a program designed to perform traditionalfinancial functions.

Digital asset

A digital instrument that is issued or represented through the use of distributed ledger orsimilar technology. This does not include digital representations of fiat currencies. It is also called a coinor token.

Distributed ledger technology (DLT)

A means of saving information through a distributed ledger, i.e. arepeated digital copy of data available at multiple locations.24 The crypto ecosystem: key elements and risks

Gas fees

Unit that relates to the amount of computational effort required to execute specific operationson the Ethereum network. Gas refers to the fee required to conduct a transaction on Ethereum.

Governance tokens

Tokens issued as an incentive, allowing the user the purported opportunity tobecome a partial owner and decision-maker in a DeFi protocol.

Mining

One means to create new crypto assets, often through a mathematical process by whichtransactions are verified and added to the distributed ledger.

Native token

The base token of a blockchain which plays an integral part in the operation of the protocolit is issued on and that is created at the blockchain’s genesis. It is usually used to pay transaction fees.

Oracle

A service that enables smart contracts to access, in real time, relevant external or off-chain data bymeans of queries typically through crypto exchange application programming interfaces and whichprovides inputs to smart contracts.

Order book exchange

A type of decentralized exchange (DEX) that uses smart contracts for transactionsettlement and order books, which are usually held off-chain by a third party, for registration of buy andsell orders.

Proof of stake

A blockchain-specific consensus mechanism for validating entries into a distributeddatabase and keeping the database secure based on validators’ pledging or “staking” a certain amount ofcrypto assets in order to have a chance to be chosen for the creation of a new block.

Proof of work

A blockchain-specific consensus mechanism for validating entries into a distributeddatabase and keeping the database secure where potential validators compete with one another to solvecryptographic puzzles in order to be allowed to add transactions to the distributed ledger.

Pseudonymous data

Data that cannot be attributed to a specific individual, without the use of additionalinformation.

Rug pull

A crypto asset market scam in which a development team attracts investors into a project beforedisappearing with investor funds, leaving investors with a valueless asset.

Side-chain

A type of off-chain scaling solution that helps overcome capacity restrictions inherent totraditional blockchain networks by leveraging a separate and independently run blockchain network thatis connected to the original one by a two-way bridge.

Smart contract

A crypto asset term that refers to self-executing applications that can trigger an action ifsome pre-specified conditions are met.

Stable coin

A crypto asset that aims to maintain a stable value relative to a specified asset, or a pool orbasket of assets.

Staking

Is the process of locking up crypto assets for a set period of time to help support the operationof a blockchain in return for a share of transaction fees.

Tokenization

The process of creating a digital representation (token) of an asset and putting it on aprogrammable ledger. The information stored in tokenised form can include asset type, ownership details,valuation, legal framework, optionality and settlement requirements

Total value locked

Industry-reported measure of the total value of assets deposited in a DeFi protocol.

Validator

An individual or entity responsible for verifying transactions on a blockchain.

Wallet

An application or device for storing the private keys providing access to the crypto asset. Hostedwallets are typically held by a third-party provider, unhosted wallets by the user.

Wallet provider

A firm that offers storage services to investors in cryptoassets. These may be connectedonline (“hot” storage) or kept offline (“cold” storage).