Key terminology for navigating digital assets and onchain finance
The strategy of dividing an investment portfolio among different asset categories, such as stocks, bonds, and digital assets, to balance risk and reward according to an individual's goals, risk tolerance, and time horizon.
The regulatory obligation for investment advisers and broker-dealers to execute client transactions at the most favorable terms reasonably available under the circumstances.
A decentralized, distributed, and immutable digital ledger that records transactions in a secure and transparent manner.
An alternative financial system built on blockchain technology that allows for peer-to-peer financial services without traditional intermediaries like banks.
A broad term for any asset that exists in a digital form and comes with the right to use. This includes cryptocurrencies, tokens, and other digital collectibles.
An investment management service where the client gives the manager the authority to make investment decisions on their behalf, without needing prior approval for each transaction.
The Employee Retirement Income Security Act of 1974. A federal law that sets minimum standards for most voluntarily established retirement and health plans in private industry to provide protection for individuals in these plans.
A potential risk in providing liquidity to a decentralized exchange (DEX), where the value of your assets when withdrawn from the pool is less than it would have been if you had simply held them.
A formal document drafted between an investment adviser and a client that outlines the client's investment goals, objectives, risk tolerance, and the strategies the adviser will employ to meet those objectives.
Know Your Customer (KYC) and Anti-Money Laundering (AML) are regulatory requirements for financial institutions to verify the identity of their clients and prevent illegal activities.
An advanced cryptographic method that allows multiple parties to jointly compute a function over their inputs while keeping those inputs private. In the context of wallets, it splits the private key into multiple shares, eliminating a single point of failure.
An investment management service where the manager provides advice and recommendations, but the client must approve every transaction before it can be executed.
A secret, alphanumeric code that allows you to access and manage your cryptocurrency. Loss of your private key means loss of your assets.
A bank, trust company, or other entity that meets the requirements of the SEC Custody Rule to hold client funds and securities.
An SEC rule (Rule 206(4)-2) designed to protect client assets from being lost, misused, or stolen by their investment adviser. It generally requires advisers with custody of client assets to hold them with a qualified custodian.
The Securities Investor Protection Corporation. A non-profit corporation that provides limited insurance to investors on their brokerage accounts if their brokerage firm becomes insolvent. SIPC protection does not cover digital assets or losses from market fluctuations.
A penalty mechanism in Proof-of-Stake blockchain networks where a validator loses a portion of their staked assets for malicious behavior or significant downtime.
A self-executing contract with the terms of the agreement directly written into code. They run on a blockchain and are immutable.
The process of locking up digital assets to participate in and help secure a blockchain network in exchange for rewards.
A digital wallet where you, and only you, hold and control the private keys.