Glossary

Annual percentage yield (APY) is the yearly rate of return on savings or deposits that includes the effect of compounding, making it higher than a simple interest rate.

A savings account is an interest-bearing deposit account at a bank or credit union that keeps money accessible and is insured by the FDIC or NCUA up to legal limits.

A bank savings account that pays a higher interest rate than a traditional one, usually offered by an online bank.

A money market account is an interest-bearing bank or credit union deposit account, insured by the FDIC or NCUA, that may permit limited check or debit access.

A money market fund is a mutual fund that invests in short-term, low-risk debt such as Treasury bills and commercial paper.

FDIC insurance is government-backed protection from the Federal Deposit Insurance Corporation that repays deposits at member banks up to a legal limit per depositor, per bank, per ownership category, if the bank fails.

Two ways to quote an annual interest rate: APY includes the effect of compounding, APR does not.

An interest rate is the annual percentage a lender charges a borrower or pays a depositor.

The rate of return quoted on a product, stated as a yearly figure.

Compound interest is interest calculated on both the original principal and previously earned interest, causing a balance to grow faster over time than with simple interest.

Yield is the income return on an investment or deposit, usually stated as a yearly percentage of the amount invested or held.

A basis point is a unit equal to one hundredth of one percent (0.01 percent), so 100 basis points equal 1 percent.

A certificate of deposit is a bank time deposit that locks a fixed sum for a set term at a fixed interest rate, with an early-withdrawal penalty and federal deposit insurance up to legal limits.

A Treasury bill (T-bill) is a short-term debt security issued by the US government, sold at a discount to face value and maturing in one year or less.

The interest rate US banks charge one another for overnight loans of reserves, guided toward a target range set by the Federal Reserve, which influences borrowing and saving rates across the economy.

Inflation is the rate at which the general level of prices rises over time, reducing the purchasing power of a currency.

A cash sweep is an account feature that automatically moves uninvested cash, often in a brokerage account, into an interest-bearing option such as a money market fund or a partner bank deposit.

Passive income is money earned from an asset or arrangement that requires little ongoing effort to maintain, such as interest, dividends, or rental income, as opposed to wages from active work.

A digital token designed to hold a steady value, usually pegged to one US dollar.

USDC (USD Coin) is a US-dollar stablecoin issued by Circle, designed to stay worth one dollar and backed by cash and short-term US Treasuries with regular attestations.

Tether (USDT) is the largest US-dollar stablecoin by market value, issued by Tether and designed to hold a one-dollar value, backed by reserves the issuer reports and running on many blockchains.

A US-dollar stablecoin issued by Paxos.

The interest earned by supplying the USDC stablecoin to a lending market or protocol.

Real-world assets (RWA) are tokenized representations of off-chain assets, such as short-term US Treasuries, private credit, or real estate, recorded on a blockchain so they can be held and transferred on-chain.

Reserves are the assets a stablecoin issuer holds to back its tokens one-to-one, while an attestation is an independent accountant's report confirming those reserves at a point in time, which is narrower than a full financial audit.

A depeg is when a stablecoin trades away from its intended value, such as below one dollar.

DeFi (decentralized finance) is a category of financial services such as lending, borrowing, trading, and saving that run on public blockchains through smart contracts instead of banks or brokers, with users interacting directly via apps and wallets.

A blockchain is a shared, append-only digital ledger maintained across many computers, where transactions are grouped into cryptographically linked blocks so records are hard to alter.

A smart contract is self-executing code stored on a blockchain that runs automatically when its conditions are met, without an intermediary, and powers decentralized finance applications.

A crypto wallet is software or hardware that stores the cryptographic keys used to access and manage crypto assets and to interact with blockchain applications.

A private key is a secret cryptographic code that proves ownership of crypto assets and authorizes transactions from a wallet.

Self-custody is holding your own crypto assets and controlling the private keys yourself, rather than trusting a third party to hold them, which gives full control but also full responsibility for key security.

Non-custodial vs custodial describes who controls an asset and its keys: a custodial third party holds them for you, while non-custodial means you keep direct control and must authorize any movement of funds.

A decentralized, non-custodial lending protocol that matches lenders and borrowers on public blockchains.

A lending protocol is a decentralized finance application, run by smart contracts on a public blockchain, that lets users supply crypto to earn interest and borrow against collateral, with interest rates set by supply and demand.

A smart contract that pools deposits and supplies them to a lending market on a depositor's behalf.

A decentralized lending protocol where users supply and borrow crypto assets.

Collateral is an asset a borrower pledges to secure a loan, which the lender can claim if the loan is not repaid.

Overcollateralization is the practice of posting collateral worth more than the amount borrowed, common in on-chain lending, so lenders keep a buffer of protection if the collateral falls in value.

Loan-to-value (LTV) is a ratio comparing a loan amount to the value of the collateral backing it, used in mortgages, auto loans, and on-chain lending to measure risk.

Liquidation is the forced sale of a borrower's collateral when its value falls below a required threshold, used to repay the loan and protect lenders from loss.

Liquidity is how easily an asset can be converted to cash without materially affecting its price, and also the pool of funds available to trade in a market.

Total value locked (TVL) is the total value of assets deposited in a DeFi protocol at a given time, commonly used to gauge the protocol's size and adoption.

Paxos Trust Company is a US-regulated trust company that issues and manages stablecoins, including PayPal USD (PYUSD), holding reserves and publishing third-party attestations.

Circle is a US financial-technology company that issues the USDC stablecoin, backing it with reserves held in cash and short-term US Treasuries and publishing regular third-party attestations.

Ethereum is a public, programmable blockchain that introduced smart contracts and hosts many stablecoins and DeFi protocols.

The Flow network is a public, layer-1 blockchain designed for consumer applications and scale, used by apps in areas such as collectibles, gaming, and finance.

ERC-20 is the technical standard for fungible tokens on Ethereum and compatible chains.

A token standard for tokenized yield-bearing vaults on Ethereum-compatible chains.

LayerZero is a cross-chain interoperability protocol that passes messages between blockchains and defines the Omnichain Fungible Token (OFT) standard, which lets a single token exist natively across multiple chains.