The world of cryptocurrencies is vast and exciting. However, it includes a lot of terms that usually only those well-versed in the spheres of blockchain and economy understand. For that reason, we have compiled a list of terms that should help you out in reading most of our materials.
A new dual-token stablecoin based on the real growth of the global economy.
The external, payment token of the Anchor dual-token system, used for trading as well as purchase of goods and services
Anchor Safety Net
The safety net is a concept that ensures the Anchor’s stability through almost every scenario imaginable. To do that, the Anchor Safety Net uses six pillars: The Global Economy Pillar, the Daily Adjustment Pillar, the Investment Pillar, the Reinvestment Pillar, the Algorithm Pillar, the Two-Token Model Pillar.
An economic measurement of the sum of all final goods and services produced in an economy expressed as the total amount of money exchanged for those goods and services.
Algorithm Pillar (Safety Net)
The Algorithm Pillar uses a validated mathematical formula to re-adjust the value of the Anchor token and keep the price stable.
Basis is a stablecoin that used to be known as Basecoin and managed to raise over $133 million. The value of Basis was pegged to $1. To maintain the price they would expand or contract the supply of the Basis coins when necessary. Unfortunately, regulatory issues led to the downfall of Basis.
Basket of Goods
A fixed set of consumer products and services estimated on a yearly basis and used to keep track of inflation in a specific environment. The primary use of the basket of goods is to calculate the CPI (Consumer Price Index).
BitUSD is another attempt from BitShares to create a stable smart coin. It should always be worth at least $1, but to purchase $1 worth of BitUSD you would have to lock up $2 in a smart contract. It successfully removed the human factor, but the price fluctuations are quite noticeable meaning that it doesn’t function as a true stablecoin.
Black Swan Event
Traditionally unpredictable events that appear to be random and tend to deviate more than expected. Black Swan events have a highly subjective aspect to them as they rely on the observer to fail to predict the event. What is completely unpredictable to someone is borderline obvious to someone else.
Blockchain is a system that keeps a record of transactions that were made in a cryptocurrency across multiple computers through the use of a peer-to-peer network.
Carbon is a stablecoin that works with a system that is similar to that of Basis. However, it determines the adjustments on a daily system. They partnered with Hedera Hashgraph to avoid trading on blockchain and reach unparalleled speed when compared with other stablecoins. But, that also means that they are tethered to the Hashgraph’s mainnet launch.
Collateralization works as a mechanism of assurance against the default risk of a borrower. In essence, the borrower pledges assets that the lender can use as recourse in the case of a loan default.
The contraction phase of Anchor tokenomics happens when the value of a certain coin dips below the value of 1 MMU. In this phase, the number of available Anchor Tokens is reduced. It is done by opening an auction that offers Anchor Token holders to exchange them for Dock Tokens with a discount. Later on, they will be able to redeem the Dock Tokens for a higher amount of Anchor Tokens.
A measure of the curvature in the relationship between bond prices and bond yields that demonstrates how the duration of a bond changes as the interest rate changes. Convexity is used as a risk-management tool, which helps measure and manage the amount of market risk to which a portfolio of bonds is exposed.
Consumer Price Index (CPI)
The CPI is one of the most common statistics that are used for following inflation and deflation periods. The CPI measures the average prices of a basket of goods. To get this statistic you take the price changes of each item in the basket and average them out.
Country Representatives (in the Anchor system)
Anchor will have an advisory body that will consist of country representatives. Those representatives will be chosen by the governments of the said countries. Anchor will reserve up to 195 batches of a million dollars worth of Dock Tokens
Term depicting currencies that are pegged against other cryptocurrencies. While they are more decentralized and liquid than fiat-collateralized currencies, they are still pegged to a cryptocurrency that is potentially unstable.
Daily Adjustment Pillar
The safety net pillar that works by adjusting the MMU every day through the use of the FX indicator that monitors the exchange rates of the 20 countries with the most significant share in the world GDP.
Decentralized Autonomous Organization (DAO)
DAOs are organizations that operate autonomously and in a decentralized manner. They behave as venture capital funds that work on open-source code and there are no typical management structures.
Distributed Ledger Technology
An organization that was designed to be autonomous and decentralized. It acts as a form of venture capital fund, based on open-source code and without a typical management structure or board of directors. In order to be fully decentralized, the DAO was unaffiliated with any particular nation-state, although it made use of the Ethereum Network.
Rewards to shareholders. In essence, dividends represent a distribution of a company’s earnings to the shareholders.
Anchor system’s internal token that serves as a stabilization mechanism.
ERC20 is a token standard that represents all of the rules that a token needs to follow to function within the Ethereum system. That makes many ICO tokens ERC20 tokens. The standard makes it so that tokens are easier to exchange between each other or integrate into platforms, wallets, or exchanges.
Escrow is a concept that has an asset or a financial instrument held by a third party and on behalf of two parties that are making a transaction. The escrow agent will hold the funds until they receive further instructions or until predetermined instructions have been fulfilled.
Ethereum is a platform that runs smart contracts without a need for centralization. These contracts are applications that work exactly as they have been programmed to do and they remove the possiblity of third-party interference.
The value of an asset minus the amount of all liabilities on that asset.
The expansion phase of the Anchor Tokenomics happens when the value of a single token surpasses the MMU. In that case, the number of tokens in circulation will increase to satisfy the demand and control the price.
Federal Communications Commission (FCC)
The FCC is an entity that strives to allow people in the US to have access to efficient world-wide wire and radio communications services at reasonable costs.
Fiat money is the “traditional” currency in everyday use. It has no intrinsic value but it is established by the government of a country and follows government regulation. This money has no use value, and the only reason it can be used for payments is because governments maintain its value, or because parties involved in exchange agree on its value.
Fiat-collateralized (also cash-collateralized)
This term is used to describe currencies that are pegged to fiat currencies. Usually, the fiat currency in question is the US dollar. The value of these currencies lies in the fact that they are backed by cash. Unfortunately, as a solution these currencies lack scalability and stability.
A fixed exchange rate system maintains fixed exchange rates between currencies; those rates are referred to as official parity.
Floating Exchange Rate Regime
An exchange rate regime in which the price of a currency is set solely by the forex market and the relations between supply and demand.
Non-collateralized stablecoin that is pegged to the value of a US dollar. They have since rebranded the project as “Ampleforth” after the character from George Orwell’s ‘1984’. The project relies on continued interest of investors in the long run to survive.
In the world of cryptocurrencies, fungibility is a property that states that the individual units of an asset, a good, or a commodity can be interchanged with other assets, goods, or commodities of the same type.
FX indicator is the base that includes the exchange rates of top 20 countries in terms of the share in the GDP of the world (at least 1% participation).
GDP, or Gross Domestic Product, is a monetary measure of the market value of all goods and services produced in a set period of time.
Global Economy Pillar
This pillar of the Anchor safety net represents the workings of the MMU algorithm that bases itself on the growth of global economy. The rate of growth has been at a stable level of about 2.5% for the last 25 years.
The maximum number of tokens or coins that would ever enter circulation.
An investment made in order to reduce the chance of adverse price movements in an asset.
ICO (Initial Coin Offering)
ICO is a kind of crowdfunding that uses cryptocurrencies. During an ICO a certain quantity of the currency is sold to investors or speculators in exchange for other, previously established currencies.
The rate at which the overall prices of goods and services are rising, Moreover, that trend shows the rate at which the value of a currency is falling. Central banks try to limit inflation rates while avoiding deflation to keep the economy running.
A situation in which an entity proves to be incapable of paying off its bills and debts.
Capital that enters the Anchor system is then invested in a range of stable capital assets like the sovereign debt. This brings additional stability to the value of Anchor.
IOU (I Owe You) is an informal document that acknowledges the existence of a debt.
The process that follows insolvency. During this process, the business is coming to an end and is distributing assets to claimants to cover existing debts.
The availability of liquid assets to a market or company.
A blockchain that actually carries out the functionality of transferring digital currency from senders to recipients.
Maker DAO works within the Ethereum blockchain with the main goal to create a crypto-collateralized stablecoin that is pegged to the US dollar.
The value separating the higher half from the lower half of a data sample (a population or a probability distribution). For a data set, it may be thought of as the “middle” value.
Medium of exchange
An intermediary instrument (commodity, currency or a financial instrument) used to facilitate the sale, purchase or trade of goods between parties without the need to barter. A cryptocurrency has to represent a standard of value that all parties on the crypto market accept in order to be a successful medium of exchange.
The mirror vault is the account that will store the primary issue of Anchor Tokens. It will hold the first $600 million worth of them. Then, the dock tokens in the corresponding value to the mirror vault will be distributed to validators, investors, and stakeholders during the presale. The Dock Tokens will be exchangeable for the Mirror Vault Anchor Tokens on the dates according to the Mirror Vault queue.
MMU is a formula that can provide a true representation of the value of the global economy. It does that in the form of a numerical index which can be used to peg stable currencies. The MMU formula uses a proprietary algorithm that processes macroeconomic indicators every day. Those indicators are selected by Validators/Oracles that are famous for their transparency and reliability.
The MMU premium is the second variable in the MMU (apart from the FX indicator). It consists of the adjusted real risk-free rates derived from the sovereign bond yields of select countries, and their average inflation rates adjusted in accordance with their participation in the real growth of global GDP. It comes out as being approximately 0.4%.
The process by which the monetary authority of a country, typically the central bank or currency board, controls either the cost of very short-term borrowing or the monetary base, often targeting an inflation rate or interest rate to ensure price stability and general trust in the currency.
Non-collateralized (also Elastic) Currencies
These currencies operate on the principle of supply and demand.
Paxos Standard (PAX)
PAX is a token which is fully backed by USD deposits and it is effective when it comes to managing price volatility. However, it is issued by a company that is regulated by the New York State Department of Financial Services and thus lacks in the decentralization are.
Pegged Exchange Rate System
A way to find a mix of floating and fixed exchange rate regimes. The most common approach includes a country “pegging” its currency to another, a bigger currency like the US dollar. Alternatively, a currency can be pegged to a basket of currencies.
Real gross domestic product is a macroeconomic measure of the value of economic output adjusted for price changes. This adjustment transforms the money-value measure, nominal GDP, into an index for quantity of total output.
The Reinvestment pillar of the safety net requires Anchor to reinvest
Revenue Stream (Anchor)
Anchor holders will have four primary sources of revenue thanks to Anchor. The first is the revenue that comes from participating in the process of stabilization. The second is the revenue that comes from the MMU’s effect on the Anchor Token value. Third source comes from the presale discounts, and the final revenue source comes from stability fees.
Presale investors become Validators or “Oracles”.
Quantity Theory of Money
In monetary economics, the quantity theory of money states that the general price level of goods and services is directly proportional to the amount of money in circulation, or money supply.
Computer protocols that set up the rules of transactions and work as facilitators to contract enforcement or verification. The smart contracts create credible transactions without the inclusion of third parties.
Sovereign Debt (also Government Debt and Treasuries)
An accumulation of a government’s annual deficits. This means that it shows how much more a government spends than it receives in revenue over time. It refers to the amount of money or credit owed by a government to its creditors, i.e., owners of government bonds. This debt is issued by a central/national government bank and typically includes securities, bills and bonds denominated in a reserve (foreign) currency. For instance, in the United States sovereign debt is issued by the Department of Treasury, and the bonds are referred to as Treasuries: Treasury notes, Treasury bonds, Treasury bills, etc.
This type of debt is theoretically considered to be risk-free as the government can employ different measures to guarantee repayment, such as increasing taxes or printing money. However, there have been multiple cases when governments could not serve their obligations and had to default, which made investors ask for different yields across countries to secure their investments. Anchor’s core concept follows the basic logic of that approach.
SDR (Special Drawing Rights)
International type of monetary reserve currency created by the International Monetary Fund (IMF) in 1969 that operates as a supplement to the existing money reserves of member countries. These reserves are designed to improve liquidity and serve as protection against economic decline. Unfortunately, only member states are allowed to pruchase them.
A type of cryptocurrency that pegs its value to a stable asset. Most commonly, the value is pegged to gold or existing fiat currencies. It’s normal for stablecoins to be linked to a Decentralized Autonomous Organization (DAO) that controls issuance and pricing.
Stellar is a payment network that provides fast transactions that are settled through a peer-to-peer network. Stellar’s platform connects banks, payment systems, and even private entities.
Store of Value
A store of value represents a form of wealth that will maintain the current value without depreciating in the future. In that regard, the leading cryptocurrencies are not very useful as they tend to be rather unpredictable when it comes to value.
A test of transaction functionality. Testnets are the prototypes that demonstrate the potential capabilities of a project while mainnets are the “end products”.
Tether used to be considered one of the best Stablecoins out there. One of the main reasons for that was the claim that each token they release is backed by a US dollar. However, during October 2018, the price went down to $0.9 showing that the investors no longer believe in the token.
Put simply, Tokenomics is the science that deals with token economy. That means it covers everything around cryptocurrencies starting with coin creation, management, and even removal if it comes to that.
Treasury (Check Sovereign Debt)
The funds or revenue of a state, institution, or society.
TrueUSD is a fiat-collateralized stablecoin that is pegged to the value of the US dollar. The idea is that you can always redeem one TrueUSD for 1 dollar. TrueUSD has a system of registered banks and fiduciaries that handle the funds and keep the transactions secure. But, the coin’s stablity isn’t as protected against surges in price. In September 2018, the price of this token shot up to $1.4.
TIPS (Treasury Inflation Protected Securities)
Securities that are indexed to inflation to protect their investors from the potential negative effects of inflation. They are backed by the US government and many consider them to be extremely safe investments. Their par value goes up with inflation.
Anchor uses a dual token system that has the ability to circumvent and control any fluctuations in price through the management of the supply and demand chain. If other buffers fail to control the price fluctuation of an Anchor Token.
Unit of Account
Unit of Account is the basic function of money. It provides a unit of measurement that allows defining, comparing, and recording value. For example, Anchor is a unit of account as it is possible to define its value by asking “How many Anchor does this cost?”.
USD coin is another stablecoin that works with full-collateralization through the US dollar. It allows eligible financial institutions to participate in the project. But, they reserve the right to blacklist any addresses or freeze funds of the participants if they conclude that the holders might be using the coins in an illegal manner. That means that there are way too centralized for the majority of the crypto market.
Anchor will allocate 20 Validator slots to highly reputable entities (including banks, auditors, financial institutions, insurance companies, universities, investment funds, etc.). The 21st validator slot is reserved for the Anchor as a company.
Volatility is a rate at which the price of something is changing over a period of time.