Appendix

Key Terms in Traditional Finance

Legal Tender

Currency with forced circulation power established by law. It is issued and guaranteed by the state and recognized as a means of payment for all transactions within that country. The Korean won or U.S. dollar we use in everyday life are representative examples. Legal tender is a nominal currency without intrinsic value, but its value is maintained based on government credit and legal enforcement. In the modern economy, most countries issue their own legal tender, allowing them to conduct independent monetary policies.

Central Bank

The highest financial institution that formulates and implements a nation's monetary policy. It maintains financial system stability through currency issuance, interest rate adjustment, foreign exchange reserve management, etc. Notable examples include the Federal Reserve System (Fed) in the United States, the European Central Bank (ECB) in Europe, and the Bank of Korea. Central banks utilize various policy tools to achieve their two main objectives: price stability and economic growth. In particular, monetary policy through benchmark interest rate adjustment is a key policy tool that greatly influences the overall economy.

CBDC (Central Bank Digital Currency)

Digital form of legal tender issued by central banks. It is the digital version of physical currency, operating under the direct control of central banks. CBDCs combine the convenience of cash with the efficiency of digital payments, expected to enhance financial inclusion and prevent money laundering. As of 2025, more than 130 countries worldwide are researching CBDCs, with China's digital yuan considered the most advanced.

Monetary Sovereignty

A nation's right to independently control the issuance, circulation, and value of its currency. Monetary sovereignty symbolizes a country's economic independence and forms the basis for managing its economy through monetary policy. Historically, recovering monetary sovereignty was one of the first things colonial countries pursued after independence. Even today, as Eurozone countries gave up individual monetary sovereignty by adopting the euro, monetary sovereignty remains a crucial concept directly linked to a nation's economic autonomy.

SWIFT

A global financial messaging network operated by the Society for Worldwide Interbank Financial Telecommunication. It is a standardized communication system used by more than 11,000 financial institutions worldwide and has been the foundation of international financial transactions since its establishment in 1973. SWIFT is merely a messaging system, with actual fund movements occurring through separate settlement systems. It is currently evolving into SWIFT 2.0 through real-time settlement and ISO 20022 adoption, and holds such a crucial position in international finance that it is even used as a means of international sanctions.

Messaging Network

A communication system that allows financial institutions to exchange transaction information in a standardized format. SWIFT is the representative international financial messaging network, with new messaging networks like China's CIPS and Russia's SPFS also emerging. Security and reliability are the most important elements of these messaging networks, which encrypt and transmit all transaction information and ensure safety through strict authentication procedures.

ISO 20022

A standard messaging format for international financial transactions that allows richer data transmission than existing financial messages. For example, it can include more information such as detailed sender and recipient information, transaction purpose, related documents, making it easier to prevent money laundering and comply with regulations. Most international financial transactions are expected to follow this standard by 2025, with major financial networks including SWIFT already implementing it.

Settlement/Clearing System

A system that processes and finalizes transactions between financial institutions. Clearing is the process of verifying and reconciling transaction details, while settlement is the process of moving actual funds. Examples include CHIPS in the United States, TARGET2 in Europe, and BOK-Wire+ in Korea. These systems are operated by central banks or credible institutions for financial market stability and efficiency, operating in various ways such as real-time gross settlement or net settlement.

RTGS (Real-Time Gross Settlement System)

A system that immediately settles transactions individually as they occur. It is mainly used for large fund transfers and is operated by each country's central bank. Unlike the net settlement method, it processes all transactions in real-time, resulting in lower settlement risk, but participating institutions must maintain more liquidity. Recently, the introduction of new forms of RTGS systems utilizing blockchain technology is also being considered.

Nostro/Vostro Account

Accounts banks establish in each other's countries for international financial transactions. Nostro means 'our money in their bank,' and vostro means 'their money in our bank.' For example, a dollar account opened by a Korean bank at a New York bank is a nostro account from the Korean bank's perspective and a vostro account from the New York bank's perspective. This system is the basic infrastructure of international finance, but due to the inefficiency of each bank having to deposit large sums of money, new alternatives are being sought.

Key Terms in Cryptocurrency

Blockchain

Technology that records transaction information in block units and stores them in a distributed manner by connecting them like a chain. All participants share identical transaction records, and once recorded, information cannot be modified. Due to this structure, transaction reliability can be guaranteed without central authority approval, and since its start with Bitcoin in 2008, it has been utilized in various industry sectors including finance, logistics, and healthcare. In the financial sector, it is gaining attention as a foundational technology for new services such as international remittances, asset tokenization, and smart contracts.

Consensus Algorithm

The method by which participants in a distributed network validate and reach consensus on the validity of transactions. There are various approaches including Bitcoin's Proof of Work (PoW), Ethereum's Proof of Stake (PoS), and Ripple's RPCA, each with its advantages and disadvantages. The consensus algorithm is a key factor determining a blockchain's security and scalability, with appropriate methods selected according to the network's characteristics and purpose. Recently, new algorithms improving energy efficiency and processing speed continue to be developed.

Proof of Work

A method of validating transactions by inputting computing power to solve complex mathematical problems. It is the representative consensus algorithm used by Bitcoin, providing high security but criticized for excessive power consumption. In this process, called mining, new coins are issued, with an estimated annual power consumption equivalent to that of Denmark for Bitcoin mining worldwide as of 2024. Recently, due to environmental concerns, there is increasing interest in eco-friendly mining or alternative algorithms.

Proof of Stake

A method of granting transaction validation authority proportionally to the amount of coins held (stake). Unlike Proof of Work, it doesn't require large-scale computing power, making it energy-efficient, and because validators participate by staking their own shares, it also ensures network stability. It has gained more attention since Ethereum's transition from Proof of Work to Proof of Stake in "The Merge" in 2022, resulting in a 99.9% reduction in annual energy usage. Currently, most new blockchain projects adopt the Proof of Stake method.

Smart Contract

Programmed contracts that automatically execute on the blockchain. When specific conditions are met, contracts are automatically fulfilled, enabling secure transactions without intermediaries. For example, in real estate transactions, ownership can automatically transfer when payment is made, or insurance payments can be made immediately when claim conditions are met. This technology, first introduced by Ethereum, now forms the basis for various blockchain services including DeFi, NFTs, and DAOs, and is also being utilized for business and government process automation.

Stablecoin

Cryptocurrency with value fixed to legal tender or other assets. USDT (Tether) and USDC, which are pegged 1:1 to the dollar, are representative examples, and they maintain reserves equivalent to their value. They complement the high volatility drawback of general cryptocurrencies and have high utility in actual transactions, particularly being widely used for fund transfers between cryptocurrency exchanges or international remittances. As of early 2025, the total market capitalization of stablecoins exceeded $200 billion, and the market is being reorganized according to government regulatory policies.

DeFi (Decentralized Finance)

A system providing financial services on the blockchain without centralized financial intermediaries. It offers most traditional financial services including loans, deposits, asset management, and insurance in a decentralized manner. All transactions are automated through smart contracts, resulting in low intermediation fees and openness for anyone to participate. The DeFi market, which grew to $180 billion at its peak in 2021, has undergone adjustments due to several hacking incidents and regulatory strengthening, but continues to develop as an alternative to traditional finance.

DEX (Decentralized Exchange)

A decentralized exchange allowing direct cryptocurrency exchange through smart contracts without centralized exchanges. Uniswap and Curve are representative examples, operating with a structure where users provide funds to liquidity pools and earn fee income in return. Transactions occur directly from personal wallets, reducing hacking risk and ensuring anonymity, but they have drawbacks of slower transaction speeds and more complex usage compared to traditional centralized exchanges. As of early 2025, approximately 15% of global cryptocurrency transactions occur through DEXs.

STO (Security Token Offering)

The issuance of tokens representing physical assets or financial products. It allows various assets like stocks, bonds, real estate to be issued and traded as digital tokens on the blockchain. It costs less than traditional securities issuance, increases liquidity, and has advantages like automatic dividend payments through smart contracts. The market is growing as governments around the world establish related legal systems, with tokenization of illiquid assets like real estate and art being particularly active.

Hard Fork

A division where blockchain protocol changes significantly, becoming incompatible with previous versions. This causes one blockchain to split into two independent chains. A representative example is Bitcoin Cash separating from Bitcoin in 2017. Hard forks usually occur for performance improvements or security enhancements, but sometimes due to community opinion conflicts. This is an important issue related to blockchain governance and can affect network stability.

Programmable Money

Digital currency where specific conditions or rules can be programmed. It allows setting restrictions on usage purpose, time, place, or conditions for automatic execution. For example, government subsidies can be restricted to specific regions or industries, or salaries can be paid in real-time according to working hours. With the development of CBDCs and smart contracts, its utility is increasing, gaining attention as a tool to enhance the efficiency of policy fund execution.

Key Terms Related to Ripple

XRP

The basic cryptocurrency of the Ripple network, with 100 billion pre-mined in 2013. It is used for remittance fees and as a bridge currency, with a small amount of XRP burned in all transactions to prevent spam. XRP can be divided down to one-millionth units called 'drops,' enabling efficient remittances even with price increases. About half of the total issuance is stored in escrow accounts by Ripple Labs, designed to release only 1 billion XRP per month.

RPCA (Ripple Protocol Consensus Algorithm)

Ripple's unique consensus algorithm, which validates transactions through the consensus of trusted validators, unlike Proof of Work or Proof of Stake. Each node has a list of validators it trusts (UNL), and transactions are approved when more than 80% of them agree. Fast processing times of 3-5 seconds and minimal energy consumption are characteristics, designed for real-time international remittances by financial institutions.

RLUSD

A dollar-pegged stablecoin released by Ripple in late 2024. It maintains 100% of its reserves in U.S. Treasury bonds and cash assets and has received approval from the New York Department of Financial Services (NYDFS). It has built-in real-time reserve audit systems and programmable compliance functions, allowing financial institutions to use it safely. Unlike Tether (USDT) or USDC, it was designed with regulatory compliance in mind from the start and is particularly gaining trust from institutional investors.

ODL (On-Demand Liquidity)

A service enabling real-time international remittances using XRP as a bridge currency. It significantly reduces operational costs by eliminating the need for pre-funding accounts (nostro/vostro) required in existing systems. When a remittance request is received, the local currency in the departure country is exchanged for XRP, which is then exchanged back to the local currency in the destination country, with the entire process completed within 3-5 seconds. As of early 2025, it is being serviced in more than 40 countries worldwide.

RippleNet

Ripple's global payment network connecting financial institutions worldwide. With more than 300 financial institutions participating, it provides real-time international remittance services and fully supports the ISO 20022 messaging standard. It can be accessed through a single API, making system integration easy, and is being actively used especially in the Asia-Pacific region. It is evaluated to provide over 40% cost savings compared to traditional international remittances.

XRP Ledger (XRPL)

A distributed ledger system recording XRP transactions. It can process more than 1,500 transactions per second and provides fast transaction finality of 3-5 seconds through the RPCA consensus algorithm. Unlike Bitcoin or Ethereum, it has no mining process, making it energy-efficient, and a small amount of XRP is burned in all transactions to prevent spam. It has various built-in financial functions including issuable assets, decentralized exchange (DEX), and payment path optimization.

CBDC Private Ledger

A dedicated blockchain platform supporting CBDC issuance and operation for central banks. Based on XRP Ledger technology, it guarantees tens of thousands of transactions per second processing capability, central bank control, and privacy. It is designed so that different countries' CBDCs can be smoothly linked even if they use different technical standards, and can enhance policy implementation efficiency through programmable money functions. It is being tested in several countries including Bhutan and Palau.

RippleX

A developer platform supporting the creation of various applications on the XRP Ledger. It provides technical documentation, development tools, APIs, and operates a developer community. It supports projects in various areas including NFTs, DeFi, CBDCs, focusing particularly on promoting innovation in financial services. It is a core organization leading the expansion and technological innovation of the Ripple ecosystem.

Flare Network

A smart contract platform linked to the XRP Ledger. It was launched by airdropping Flare tokens (FLR) to XRP holders and provides smart contract functionality to the XRP ecosystem. It offers fast processing speeds and high scalability using the Avalanche consensus protocol, enabling DeFi services by integrating assets from various blockchains. As of 2024, several DeFi protocols are operating on the Flare Network.

Line of Credit

A credit service providing XRP liquidity to ODL users. It allows financial institutions to conduct international remittances without pre-funding and facilitates remittance operations particularly in emerging markets. Limits are determined by creditworthiness, and liquidity can be received in real-time. This is becoming an important tool especially for financial institutions seeking to expand remittance operations in growing markets.

Payment Channel

A scalability solution for processing frequent small transactions on the XRP Ledger. It is a so-called 'Layer 2' solution that processes transactions outside the main ledger to increase processing speed and reduce costs. It is suitable for micropayments, such as companies paying employees in real-time or streaming services charging based on viewing time. Unlimited transactions are possible within an opened channel, with only the final settlement recorded on the main ledger.