DACFP Glossary of Terms
Helping You Understand the Language of Crypto
Attempt by hackers to steal a blockchain’s data and assets by controlling the majority of the network’s nodes
Accredited Investor
Investor deemed to be wealthy or experienced
ADV
Federal disclosure document all financial institutions must provide their clients
Airdrop
Distribution of digital assets by an entity, using for marketing purposes; also called helicopter money
Anti-Money Laundering
Rule requiring financial institutions to prevent tax evasion
Economic system where people and entities trade goods and services
Base Layer Protocol
A root blockchain network that allows for the creation, transfer, and storage of digital assets. Also called a native layer
Bitcoin
A computer network using blockchain technology
bitcoin
A medium of exchange and store of value
Bitcoin Pizza Day
May 22, 2010. The first commercial transaction using bitcoin.
BitLicense
Issued by New York to companies doing business in digital assets
Block Reward
Compensation you receive for verifying data placed on a blockchain
Blockchain
A ledger that resides on the internet. Also called distributed ledger technology
Buy and Hold
Strategy of keeping an investment for years after purchase
A bank empowered by a government to price money and set interest rates
Central Bank Digital Currency (“CBDC”)
A fiat currency issued in digital form
Client Relationship Summary
Short document summarizing a financial institution’s services, fees, conflicts, and other facts
Code Of Ethics
Policy set by a financial institution governing behavior of its employees
Cold Wallet
An account holding digital assets that is not connected to the internet and therefore is safe from online hackers
Collectible
Work of art, rug, antique, precious metals or gems, rare stamps and coins
Computer Farm
An assembly of computers engaged in mining bitcoin
Consensus Mechanisms
The methodology for generating agreement among those verifying data on a blockchain
Convertible Virtual Currency
Virtual currency with an equivalent value in fiat currency
Cross-Border Transmittal
The movement of money from one country to another
Crypto Asset
Any digital asset that uses cryptography to secure transaction records on a ledger
Cryptocurrency
Virtual currency that uses cryptography to secure transactions digitally recorded on a blockchain
Currency
A physical object that represents money
Custodian
A person or entity that receives and safeguards your assets for you
The discovery of private companies that one might invest in or buy
Decentralized Autonomous Organization (“DAO”)
An entity operating independently on internet, with no one in charge
Decentralized Finance (“DeFi”)
Online systems that operate on the internet
Derivative
Investment contract based on an asset
Digital Asset
The binary representation of anything having an economic value that can be owned
Discount
Price of a security trading below net asset value
Distributed Record
Data that is posted on the intenet for all to see
Dogecoin
A digital pet rock
Dollar Cost Averaging
Strategy of investing money in set increments at consistent intervals
Donor Advised Fund
Charities that invest donations until donors dictate their distribution to other charities
Dual Registrant
Financial advisor licensed with both the SEC and FINRA
Accidently mistyping orders, thus sending the wrong digital asset or amount, or to the wrong party
Fiat Currency
Money issued by a government
Fidelity Bond
Insurance bought by a financial institution to protect itself and its clients from financial loss due to theft or crime
Fiduciary
One who serves your best interests
Fifo
“First in, first out.” Your oldest shares will be sold first
Fintech Sandbox
Government policy that allows companies to innovate without fear of fines or sanctions
Fee paid to miners to validate your transaction
Genesis Block
The first block written to the Bitcoin blockchain. Also called Block 0
GTC
A limit order that remains open until executed, no matter how long it takes for you to get the price you’ve set. The trade is “good til canceled”
An event that reduce a block reward by 50%. Also called halving
Hard Fork
The split of a blockchain into two blockchains, the result of disagreements by developers over how the blockchain should operate
Hash
A string of computer code representing data
Hedge Fund
An investment that strives to reduce risk
HiFo
“Highest in, First out.” Your shares with the biggest gain will be sold first
Hot Wallet
An account holding digital assets that is connected to the internet
Howey Test
Method used by the SEC to determine if an investment is a security
Movement of coins or tokens as-is to a different custodian. Also called trustee-to-trustee transfer
Initial Coin Offering (“ICO”)
A coin released to the market for the first time
Intermediary
A person or entity facilitating transactions between two parties
A person who doesn’t know anything about bitcoin, and who demonstrates that fact by making ridiculous comments about it. See Warren Buffet.
A document that records deposits and withdrawals, or other data
Leverage
Borrowed money that is invested, to magnify returns
LiFo
“Last in, First out.” Your newest shares will be sold first
Like-Kind Exchange
Selling one investment and purchasing another without paying capital gains. Also called a Starker exchange
Limit Order
Transaction that lets you set the worst price you’re willing to accept; trade will be executed at that price or better.
Limit orders are canceled at the end of the year if not executed.
Long-Term Capital Gain Or Loss
Holding period of more than one year
A demand that you post additional collateral; failure results in the sale of your asset
Market Order
Transaction to be made immediately or at first opportunity
Max Drawdown
A portfolio’s maximum loss
Metaverse
Broad term referring to an internet economy supported by virtual reality gamers
Metcalfe’s Law
The notion that a network’s value grows exponentially as the network adds users
Micropayment
Payment of a small amount of money, often fractions of a penny
Mining
The process of validating data on a blockchain
Modern Portfolio Theory
The notion that investing in two risky assets is safer than investing in just one of them
Multiple
Valuing a company by dividing its price by its profits
Two assets whose prices move in opposite ways at any given time
Net Asset Value (“NAV”)
Price of a security
Node
A computer on the blockchain network
Non-Correlation
Two assets who price movements are not related to each other
Non-Fungible Token (“NFT”)
A token that is unique
Software code that connects the digital world with the physical world
Outbound Oracle
Algorithm that tells a real entity about an event that occurred on a blockchain
Over The Counter (“OTC”)
Securities that do not trade on an exchange
An electronic system that is controlled by a person or entity; you cannot access or use it without their approval. Also called a centralized ledger
Permissionless System
An electronic system that anyone can access
Permissive Country
A government that does not interfere with the trading of digital assets
Play-To-Earn Game
An online game where participants earn digital assets based on their performance
Positive Correlation
Two or more assets that rise and fall in sync
Power Of Attorney
Document giving another person or entity legal control of your assets
Premium
Price of a security trading above net asset value
Private Key
Secret code giving you access to digital assets you own
Private Placement
Investment fund available only to an accredited investor
Proof Of Stake (“POS”)
Protocol that validates data on a blockchain. The more of a digital asset you stake, the greater your chance of receiving a block reward
Proof Of Work (“POW”)
Protocol that validates data on a blockchain. Involves solving complex calculations. Success results in receipt of a block reward.
Public Key
A code you share with others so they can send you digital assets
A bank, broker-dealer, futures commission merchant, or some foreign entities designated by the SEC or a state agency to serve as a custodian
Restoring a portfolio’s asset allocation by selling some assets and purchasing others
Red Flags Identity Theft Program
Procedures set by a financial institution to protect its clients and their assets
Registered Representative
A stockbroker
Restricted Period
6- or 12-month period during which you cannot sell your investment
Ric Edelman’s 1% Digital Assets Allocation Strategy
A brilliant investment strategy, especially for those new to digital assets
Second Layer Protocol
Built on a base layer protocol; provides additional features and capabilities
Separately Managed Account (“SMA”)
Hybrid between owning investments directly and via a fund
Sharpe Ratio
A formula that measures an asset’s or portfolio’s return per unit of volatility
Short-Term Capital Gain Or Loss
Holding period of one year or less
Sim Card Hijacking
Hackers stealing data by accessing the removable memory chip in your smartphone
Simple Agreement For Future Equity
A contract whereby a company promises to give equity
Simple Agreement For Future Tokens
A contract whereby a company promises to give tokens if they are issued
Smart Contract
Automated movements of money that occur only upon completion of pre-arranged events
Soft Fork
Creation of a new coin that uses the original blockchain
Sortino Ratio
A formula that measures the downside volatility of an asset or portfolio
Stablecoin
A digital asset whose price is pegged to a fiat currency
Staking
Posting your digital assets on the internet, to win a block reward or earn interest
Standard Deviation
The disperion of an asset’s actual return from its average return
Strict Countries
A government that has banned digital assets transactions
Supply Chain
The movement of goods from factory to consumer
Supply vs. Demand
An economic theory that holds that an asset’s price rises as demand outpaces supply
Any event that results in a tax liability
Token
Small, physical representation of an intangible item
Trade Lot
A set of assets purchased in a single transaction
Trust Economy
An economic system that requires buyers and sellers to trust each’s other’s actions
Turnkey Asset Management Program (“TAMP”)
Back-office systems deployed by financial advisors
A person who lacks sufficient funds to open a bank account, or who doesn’t live near a bank
Unicorn
Company less than 10 years old that is worth more than $1 billion
The speed that money moves through an economic system
Venture Capital
Money invested into an early-stage company
Virtual Currency
Digital representation of a medium of exchange, unit of account, or store of value other than fiat currency
Warm Wallet
A hot wallet that can only send digital assets to wallets you designate. Reduces hacker and fat-finger risk
Warren Buffett
A person who doesn’t know anything about bitcoin, and who demonstrates that fact by making ridiculous comments about it.
See Jamie Dimon
Wash-Sale Rule
Purchases of a security sold within 30 days are not immediately eligible for capital loss deduction
The practice of lending or staking your digital assets to earn interest