Glossary

RWA Glossary

Every term in real-world-asset tokenization, clearly defined. New to the topic? Start with the Learn.

121 terms

Absorption: Absorption is the rate at which available real estate - units, square footage, or lots - gets leased or sold over a set period, used to gauge how quickly a market absorbs new supply.
Accreditation verification: Accreditation verification is the reasonable-steps process an issuer must complete under Reg D Rule 506(c) to confirm each investor is accredited, using income or net-worth evidence or a letter from a qualified third party.
Accredited Investor: An accredited investor is a person or entity that meets SEC income, net-worth, or professional-license thresholds and is therefore allowed to invest in certain private, unregistered securities offerings.
Alternative Trading System (ATS): An alternative trading system (ATS) is an SEC-regulated trading venue, operated by a registered broker-dealer, that matches buyers and sellers of securities outside a national exchange - the main venue where tokenized securities can legally trade.
AML: AML (anti-money laundering) is the framework of laws and controls - identity checks, transaction monitoring, and reporting - that financial businesses use to detect and prevent the laundering of illicit funds.
Annual Percentage Yield (APY): APY (annual percentage yield) is the rate of return on an investment over one year including the effect of compounding, which makes it directly comparable across products.
Asset Tokenization: Asset tokenization is tokenization applied to a specific real asset - representing ownership of a building, fund, or commodity as blockchain tokens so it can be divided and traded.
Attestation (On-Chain): An attestation is a signed statement that something is true - that reserves exist, a wallet passed KYC, or a fact holds - recorded so others can rely on it, often on-chain.
Attester: An attester is the trusted party that signs an attestation - a verifiable statement that something off-chain is true, such as reserves backing a token or an investor's accredited status.
Audit (smart-contract): A smart-contract audit is a thorough review of a contract's code by security specialists to find bugs and vulnerabilities before it goes live and holds real money.
Base (network): Base is Coinbase's Ethereum layer-2 network, built on the OP Stack, offering low fees and fast transactions for apps, stablecoins, and tokenized real-world assets.
Basescan / Block Explorer: A block explorer is a website that lets anyone search and read a blockchain's public data - transactions, addresses, tokens, and smart contracts - without running their own node.
Beneficial owner (UBO): A beneficial owner (or ultimate beneficial owner, UBO) is the natural person who ultimately owns or controls an entity, whom AML rules require a business to identify - commonly anyone owning 25% or more, plus a person who controls the entity.
Blockchain: A blockchain is a shared, append-only digital ledger, maintained by a network of computers, that records transactions in linked blocks so no single party can secretly alter the history.
Broker-dealer: A broker-dealer is a firm registered with the SEC and FINRA that is in the business of buying and selling securities for customers or its own account, whose involvement is often required to market or trade tokenized securities.
Burn / Burning: Burning is the permanent destruction of tokens, recorded by a smart contract that reduces the total supply - commonly used when an asset is redeemed or tokens are retired.
Cap Rate (Capitalization Rate): A cap rate is a property's net operating income divided by its price, expressed as a percentage, used to estimate the unleveraged annual return and to compare one income property against another.
Capital Gains: Capital gains are the profit you make when you sell an asset for more than you paid for it, and in the US are generally taxable in the year the asset is sold.
Chainlink CCIP: Chainlink CCIP (Cross-Chain Interoperability Protocol) is infrastructure that lets smart contracts and tokens send messages and value securely between different blockchains.
Comparable Sales (Comps): Comparable sales, or comps, are recent sale prices of similar nearby properties used to estimate what a given property is worth, adjusted for differences in size, condition, and location.
Construction Loan: A construction loan is short-term financing that funds the building or heavy renovation of a property, released in stages as work is verified and repaid when the project is sold or refinanced into a permanent loan.
Counterparty Risk: Counterparty risk is the chance that a party you rely on in a transaction - an issuer, custodian, or borrower - fails to meet its obligations, causing you a loss.
Developer Equity: Developer equity is the sponsor's own capital and ownership stake in a real-estate project, which sits in the first-loss position behind lenders and other investors and signals that the developer has skin in the game.
Distribution Committed: Distribution committed describes funds that an issuer has irrevocably set aside in a distribution contract for token holders to claim - allocated and locked, pending each holder's withdrawal.
Distribution Waterfall: A distribution waterfall is the set of rules that determines the order and proportion in which a deal's cash flow is paid out to investors and the sponsor.
Distributor: A distributor is the party that markets a token offering and places it with investors during primary issuance - often a licensed broker-dealer, and distinct from the issuer that sells the security.
Due Diligence: Due diligence is the investigation an investor performs before committing capital, verifying the asset, the people, the legal structure, and the risks behind an offering.
ERC-1400: ERC-1400 is an early suite of Ethereum standards for security tokens, adding partitioned balances, transfer-restriction checks, and off-chain documentation to the basic token model.
ERC-20: ERC-20 is the Ethereum standard for fungible tokens, defining a common set of functions so wallets and apps can handle any compliant token - from stablecoins to governance tokens - the same way.
ERC-3643: ERC-3643 is an Ethereum standard for permissioned security tokens that checks each holder's verified on-chain identity before allowing a transfer, enforcing compliance in the token itself.
ERC-4626 (Tokenized Vault Standard): ERC-4626 is a token standard for tokenized yield vaults - it standardises how you deposit an asset, receive shares, and redeem them, so vaults and the apps built on them interoperate.
Escrow: Escrow is holding funds with a neutral party or smart contract until agreed conditions are met - in a token raise, investor money is held until the offering closes before it reaches the issuer.
Ethereum: Ethereum is a public blockchain that runs smart contracts, making it the main platform where real-world assets are tokenized and where most stablecoins and token standards live.
Ethereum Attestation Service (EAS): The Ethereum Attestation Service (EAS) is an open standard for making on-chain or off-chain attestations - signed statements that something is true, such as that a wallet passed KYC.
Fiat Off-Ramp: A fiat off-ramp is a service that converts crypto or a stablecoin back into traditional money in your bank account - the exit route for turning on-chain proceeds into spendable cash.
Fiat On-Ramp: A fiat on-ramp is a service that converts traditional money (like dollars or euros) into crypto or a stablecoin, so you can fund a wallet and buy on-chain assets such as RWAs.
Form D: Form D is the brief notice an issuer files with the SEC through EDGAR, generally within 15 days of the first sale of securities in a Regulation D offering, disclosing basic facts about the company and the raise.
Fractional Ownership: Fractional ownership means holding a small share of an expensive asset alongside others - tokenization makes these shares cheap to issue, divide, and transfer on-chain.
Fundraising Deadline: A fundraising deadline is the date by which a token offering must reach its minimum target - if it does, funds release to the issuer; if not, escrowed investor money is returned.
Gas Fee: A gas fee is the payment you make to a blockchain network to process your transaction, covering the computing work needed to run and record it.
General solicitation: General solicitation is public advertising or marketing of a securities offering - through websites, social media, press, or public events - which is banned under Reg D Rule 506(b) but permitted under Rule 506(c) if every investor's accreditation is verified.
Hardware Wallet: A hardware wallet is a physical device that keeps your private keys offline and signs transactions on the device itself, protecting assets from malware on your computer or phone.
Issuer: The issuer is the legal entity that creates and sells a token-based security and owes the obligations behind it - often a special-purpose vehicle formed to hold one deal's assets.
KYB (Know Your Business): KYB (Know Your Business) is the due-diligence process of verifying a corporate or institutional customer - its legal existence, ownership, and beneficial owners - the entity-level counterpart to KYC.
KYC: KYC (Know Your Customer) is the process of verifying a customer's identity before and during a financial relationship, a core part of anti-money-laundering compliance that gates who can buy into most tokenized offerings.
KYC Registry: A KYC registry is an on-chain record of which wallet addresses belong to verified, eligible investors - the source of truth a security token checks before allowing anyone to hold or receive it.
Layer 2 (L2): A layer 2 is a secondary blockchain that processes transactions cheaply and quickly off a main chain like Ethereum, then settles the results back to it for security.
Liquidity: Liquidity is how quickly and cheaply an asset can be converted to cash or a stablecoin at a fair price without moving the market against you.
LLC operating agreement: An LLC operating agreement is the governing contract of a limited liability company that sets out ownership, management, voting, and how profits and losses are distributed among members.
Lock-up period: A lock-up period is a window after an investment during which the investor cannot sell or transfer the securities, imposed by contract or by securities-law holding requirements such as SEC Rule 144.
Merkle Proof: A Merkle proof is a compact cryptographic proof that a specific piece of data belongs to a large dataset, verified against a single short fingerprint called a Merkle root.
MiCA: MiCA (Markets in Crypto-Assets Regulation) is the European Union's comprehensive framework for crypto-assets and stablecoins - not a US law - that generally does not cover assets already qualifying as financial instruments such as securities.
Minimum Investment: The minimum investment is the smallest amount you are allowed to put into an offering - tokenization often lowers it dramatically through fractional ownership, though some deals still set a floor.
Mint / Minting: Minting is the act of creating new tokens on a blockchain, recorded by a smart contract that increases the total supply and assigns the new tokens to an address.
Multisig (Gnosis Safe): A multisig is a wallet that requires several private keys to approve a transaction before it executes, removing any single point of failure in control of funds.
NAV Oracle: A NAV oracle is a data feed that posts a fund's net asset value on-chain, so a tokenized fund's smart contracts can price, issue, and redeem tokens at the correct value.
Net Asset Value (NAV): Net asset value (NAV) is the per-share value of a fund or tokenized asset, calculated as total assets minus liabilities divided by the number of shares or tokens outstanding.
Non-Accredited Investor: A non-accredited investor is anyone who does not meet the SEC's accredited-investor income, net-worth, or license thresholds, and so faces limits on which private offerings they can invest in.
Non-Transferable Token: A non-transferable token is a token that cannot be moved from the address that holds it, used for credentials, identity, or securities under a mandatory holding period.
Offering memorandum: An offering memorandum is a disclosure document that describes a securities offering, its terms, and its risks to prospective investors; in US private placements it is usually called a private placement memorandum.
On-Chain / Off-Chain: On-chain means data or actions recorded on a blockchain; off-chain means anything outside it. Real-world assets live off-chain while their tokens live on-chain, linked by law and oracles.
Oracle: An oracle is a service that feeds real-world data - like prices, interest rates, or asset values - into a blockchain, so smart contracts can act on information that does not originate on-chain.
PPM (Private Placement Memorandum): A private placement memorandum (PPM) is the disclosure document an issuer gives prospective investors in a private offering, describing the business, the securities, the deal terms, and the risks.
Preferred Equity: Preferred equity is an ownership stake that ranks ahead of common equity for payouts, earning a set preferred return before developers and common investors are paid, but sitting behind senior debt.
Preferred Return: A preferred return is a minimum annual return that investors must receive before the sponsor of a deal shares in any profits, common in real estate and private equity.
Primary Issuance: Primary issuance is the first sale of a security or token directly by the issuer to investors, raising capital for the issuer before any secondary trading begins.
Private Key: A private key is the secret number that controls a blockchain address, letting its holder authorize transactions - whoever has it controls the assets at that address.
Private placement: A private placement is a securities offering sold to a limited group of qualified investors without a public offering or SEC registration, typically under a Regulation D exemption and documented by a private placement memorandum.
Pro-Rata: Pro-rata means allocating something in proportion to each participant's share, so an investor who owns 2% of the tokens receives 2% of the distributions.
Proof of Reserves: Proof of reserves is evidence that the real assets backing a token actually exist and match the tokens in circulation, usually via third-party attestation or on-chain verification.
Proof of Stake: Proof of stake is the consensus mechanism most modern blockchains use to agree on transactions - validators lock up (stake) the network's token to secure it, instead of burning energy mining.
Qualified custodian: A qualified custodian is a bank, trust company, registered broker-dealer, or similar regulated entity permitted to hold client assets under the Investment Advisers Act custody rule, which applies when a registered adviser holds client crypto or tokenized securities.
Qualified Purchaser: A qualified purchaser is an individual or entity that owns at least $5 million in investments, a higher bar than accredited investor that allows access to certain large private funds.
Real Estate Syndication: A real estate syndication pools money from multiple investors under a lead sponsor to buy or build a property, usually through a single-purpose entity, with profits shared according to an agreed waterfall.
Real-Estate-Backed Token: A real-estate-backed token is a token whose value is secured by real property - either equity in a building or debt backed by it - held in a legal entity on the holder's behalf.
Real-World Asset (RWA): A real-world asset (RWA) is an off-chain asset of value - like real estate, a Treasury bill, or a loan - whose ownership or economic rights are represented by a token on a blockchain.
Recovery Delay: A recovery delay is a built-in waiting period before a sensitive smart-contract action - like recovering an account or changing an admin control - takes effect, giving time to detect and stop misuse.
Redemption: Redemption is the process of returning a token or fund share to its issuer in exchange for its underlying value, usually paid in cash or a stablecoin at net asset value.
Reg D Rule 506(b): Rule 506(b) is the Regulation D exemption that lets an issuer raise unlimited capital from accredited investors (plus up to 35 sophisticated non-accredited investors) without SEC registration, but it bans general solicitation.
Reg D Rule 506(c): Rule 506(c) is the Regulation D exemption that lets an issuer advertise a private offering publicly, but every investor must be accredited and the issuer must take reasonable steps to verify that accreditation.
Reg S Category 1/2/3: Regulation S sorts offerings into Category 1, 2, or 3 based on the issuer's US market ties and the type of security, with each category imposing progressively stricter distribution-compliance periods and resale conditions.
Regulation A+: Regulation A+ is an SEC exemption - sometimes called a mini-IPO - that lets a company raise up to $75 million in a 12-month period from the public, including non-accredited investors, after the SEC qualifies its offering circular.
Regulation CF (crowdfunding): Regulation CF is the SEC crowdfunding exemption that lets a company raise up to $5 million in a 12-month period from the general public, but only through a single SEC-registered funding portal or broker-dealer.
Regulation D: Regulation D is a set of SEC exemptions - most importantly Rules 506(b) and 506(c) - that let a company raise capital privately without registering the offering, subject to conditions and a Form D notice filing.
Regulation S: Regulation S is the SEC safe harbor for securities offered and sold outside the United States to non-US persons, which are exempt from SEC registration when the offering meets its offshore-transaction and distribution-compliance conditions.
REIT (Real Estate Investment Trust): A REIT is a regulated company that owns or finances income-producing real estate and must distribute at least 90% of its taxable income to shareholders as dividends, giving investors a liquid, diversified way to own property.
Resale restriction: A resale restriction is a legal limit on reselling securities acquired in an exempt offering, requiring a holding period or a further exemption before the holder can transfer them - commonly satisfied under SEC Rule 144.
Restricted jurisdiction: A restricted jurisdiction is a country or region from which an offering refuses investors - because of sanctions, local securities law, or the issuer's own risk policy - enforced through KYC and geoblocking.
Rug Pull: A rug pull is a scam in which the creators of a crypto project suddenly withdraw investors' funds or abandon the project, leaving holders with worthless tokens.
Sanctions screening: Sanctions screening is the process of checking customers, counterparties, and wallet addresses against government sanctions lists - such as the US OFAC SDN list - to block prohibited persons and jurisdictions.
SEC: The SEC (US Securities and Exchange Commission) is the federal agency that regulates US securities markets, enforces disclosure and registration rules, and oversees the exemptions most tokenized-asset offerings rely on.
Secondary Market: A secondary market is where investors buy and sell an asset from one another after it has been issued, rather than buying it directly from the issuer.
Security (the Howey test): The Howey test is the four-part US Supreme Court standard for deciding whether an arrangement is an investment contract - and therefore a security - based on an investment of money in a common enterprise with a profit expectation from the efforts of others.
Security Token: A security token is a blockchain token that represents a regulated investment - equity, debt, or a share of profits - and so must follow securities law in how it is issued and traded.
Seed Phrase: A seed phrase is a list of 12 to 24 ordinary words that backs up and can fully restore a crypto wallet and its private keys - anyone who has it controls the wallet.
Smart Contract: A smart contract is a program stored on a blockchain that runs automatically when its conditions are met, enforcing rules like token transfers or payouts without a middleman.
Smart-Contract Risk: Smart-contract risk is the chance of losing funds because of a bug, exploit, or design flaw in the on-chain code that holds or governs a tokenized asset.
Special Purpose Vehicle (SPV): A special purpose vehicle (SPV) is a separate legal entity - usually an LLC - created to hold a single asset or deal, so that the tokens issued represent shares in that entity and its one underlying asset.
Sponsor: The sponsor is the party that sources, structures, and manages a tokenized deal - the operator who finds the asset and runs it, as distinct from the entity that legally issues the token.
SPV Admin / Treasury: The SPV admin or treasury is the function that operates the holding entity day to day - managing its bank accounts, paying distributions to token holders, funding redemptions, and keeping the books and ownership records.
Stablecoin: A stablecoin is a token designed to hold a steady value, usually pegged 1:1 to a currency like the US dollar and backed by reserves, used to pay and settle on-chain.
Subscription agreement: A subscription agreement is the contract an investor signs to buy securities in a private offering, committing to the purchase and making the representations - such as accredited status - that the issuer relies on.
Token purchase agreement: A token purchase agreement (TPA) is the contract governing an investor's purchase of tokens in an offering, setting price, delivery, and investor representations - serving the role a subscription agreement plays in a traditional raise.
Token Standard: A token standard is a shared set of functions a token's smart contract must implement so that any wallet or app can handle it the same way - ERC-20 for fungible tokens, ERC-3643 for security tokens.
Tokenization: Tokenization is the process of issuing a blockchain token that represents ownership of, or a claim on, an asset - so the asset can be divided, transferred, and settled on-chain.
Tokenized Commodity: A tokenized commodity is a token backed by a physical commodity like gold or oil, where each token is a claim on a specific, custodied quantity of the real material.
Tokenized Fund: A tokenized fund is an investment fund whose shares are issued as blockchain tokens, so units can settle on-chain and pay yield programmatically while remaining a regulated fund.
Tokenized Private Credit: Tokenized private credit represents loans to businesses - private, non-bank lending - as blockchain tokens, letting investors earn interest income from a loan book on-chain.
Tokenized Real Estate: Tokenized real estate represents ownership of a specific property, or a share of its income and sale proceeds, as blockchain tokens - letting investors buy fractions of one deal.
Tokenized Security: A tokenized security is a traditional security - a stock, bond, or fund share - reissued as a blockchain token, keeping the same legal status but settling on-chain.
Tokenized Treasury: A tokenized Treasury is a token backed by US Treasury bills or a Treasury fund, giving on-chain holders exposure to government-bond yield with blockchain settlement.
Total Value Locked (TVL): Total value locked (TVL) is the total dollar value of assets deposited in a blockchain protocol or smart contract at a given moment, used as a rough gauge of its scale and adoption.
Transfer agent: A transfer agent is an SEC-registered entity that maintains the official record of a security's owners and processes transfers, and in tokenized offerings may keep that ownership ledger on-chain.
Transfer Restriction: A transfer restriction is a rule coded into a security token that limits when, to whom, and under what conditions it can be moved - enforcing compliance like lock-ups, holder caps, and jurisdiction limits.
Underlying Asset: The underlying asset is the real, off-chain thing a token represents - the building, Treasury bill, or loan whose value and cash flows give the token its worth.
US person (Reg S): A US person, as defined in Regulation S, is broadly any natural person resident in the United States (plus US-organized entities and certain others), the category that offshore Reg S offerings must exclude to stay exempt from SEC registration.
USDC: USDC is a US-dollar stablecoin issued by Circle, backed roughly 1:1 by cash and short-term US Treasuries, widely used to settle on-chain payments and tokenized-asset deals.
Utility Token: A utility token gives access to a product or service on a network - like paying for usage or governance - rather than a share of profits, so it is generally not a regulated security.
Wallet (self-custody): A self-custody wallet is software or hardware that stores your private keys yourself, giving you direct control of your on-chain assets without a company holding them for you.
Whitelist / Allow-list: A whitelist (or allow-list) is the set of approved wallet addresses permitted to hold or receive a token - security tokens use it to restrict ownership to verified, eligible investors.
Yield: Yield is the income an investment pays out over a period - such as interest, rent, or distributions - expressed as a percentage of the amount invested.