💭 Glossary of Terms
1. Real-World Asset (RWA)
A tangible or intangible asset that exists off-chain (in the traditional financial or physical world), such as real estate, commodities, bonds, or fine art, which can be tokenized on a blockchain.
2. Tokenization
The process of converting rights to a real-world asset into a digital token on a blockchain, enabling fractional ownership, increased liquidity, and transparent transferability.
3. Security Token
A digital token that represents ownership in a real-world security or financial asset, subject to regulation by securities laws.
4. Utility Token
A token that provides access to a product or service within a blockchain ecosystem. Unlike RWAs or security tokens, utility tokens are generally not considered investment vehicles.
5. Stablecoin
A type of cryptocurrency pegged to a stable asset, such as the US dollar or gold. Examples include USDC, USDT, or gold-backed tokens like XAUT.
6. Fractional Ownership
A structure that allows multiple parties to own a percentage share of an asset, made feasible through tokenization on the blockchain.
7. Smart Contract
A self-executing digital contract stored on the blockchain that automatically enforces the terms of an agreement between parties.
8. On-Chain
Refers to data or transactions recorded directly on a blockchain ledger.
9. Off-Chain
Any data, asset, or activity that exists outside of the blockchain. In RWA tokenization, the actual asset often remains off-chain while its representation is on-chain.
10. Custodian
A trusted third party that holds the physical or legal version of an RWA and ensures it backs the issued token.
11. Oracles
Services that feed off-chain data (e.g., price, interest rates) into a blockchain, often used to verify the value of RWAs or trigger smart contract actions.
12. DeFi (Decentralized Finance)
A blockchain-based financial system that operates without traditional intermediaries, enabling lending, borrowing, and trading of tokenized assets.
13. Liquidity
The ease with which an asset or token can be bought or sold in the market without affecting its price. Tokenization often enhances the liquidity of previously illiquid assets.
14. Yield Token
A token that represents a stream of cash flows or returns derived from a yield-bearing asset, such as tokenized treasury bills or loans.
15. RegTech
Short for "Regulatory Technology," this refers to software and tools that help platforms stay compliant with evolving regulations, especially important in RWA tokenization.
16. KYC (Know Your Customer)
A compliance process that requires users to verify their identity before interacting with financial or tokenized platforms.
17. AML (Anti-Money Laundering)
Regulations and procedures aimed at preventing the illegal use of tokenized assets or cryptocurrencies to launder money.
18. Proof-of-Reserve
A system or audit method used by token issuers to prove that the on-chain tokens are backed 1:1 by the underlying real-world asset.
19. Legal Wrapper
The legal entity or structure that defines the ownership, rights, and compliance framework of a tokenized asset. It links the on-chain token to off-chain legal rights.
20. Digital Twin
A digital representation of a real-world asset that mirrors its value, condition, and legal standing on the blockchain.
21. Primary Market
The initial issuance of a tokenized asset to investors, typically via a Token Generation Event (TGE) or Security Token Offering (STO).
22. Secondary Market
Platforms or exchanges where tokenized assets are traded after the initial issuance, enabling liquidity and price discovery.
23. Programmable Asset
An asset represented on-chain that includes embedded logic via smart contracts, enabling automated transfers, yield payouts, or compliance checks.
24. Settlement Layer
The blockchain or protocol layer where ownership transfers of tokenized RWAs are executed and recorded.
25. Composability
The ability of tokenized RWAs and protocols to interact with one another seamlessly, allowing assets to be used across DeFi ecosystems (e.g., lending a tokenized T-bill on a DeFi platform).