Glossary

Key terms and concepts for understanding Spark, Bitcoin Layer 2, Lightning Network, stablecoins, and digital payments.

A4 terms

Anchor Outputs

Special outputs in Lightning commitment transactions that enable dynamic fee bumping during force closes, solving fee volatility issues in channel disputes.

Lightning Network

Asset-Referenced Tokens (ARTs)

A MiCA-defined category of crypto-assets that maintain stable value by referencing multiple currencies, commodities, or other assets, subject to strict EU reserve and governance requirements.

Stablecoins

Atomic Multipath Payments (AMP)

A Lightning Network payment protocol that splits large payments across multiple paths using cryptographic secret sharing, ensuring all parts arrive or none do.

Lightning Network

Autoloop

An automated liquidity management system that uses rules-based submarine swaps to maintain optimal channel balances on Lightning Network nodes.

Lightning Network

C5 terms

Channel Factory

A proposed multi-party channel setup that enables efficient batch opening and closing of Lightning payment channels, significantly reducing on-chain footprint and improving scalability.

Lightning Network

Channel Reserve

The minimum balance that must be maintained in a Lightning Network channel to ensure both parties can cover potential closure fees and prevent gaming the system.

Lightning Network

Chantools

A command-line toolkit for Lightning Network channel recovery and troubleshooting, used to rescue funds from stuck, force-closed, or corrupted channels.

Wallets

Circular Rebalance

A Lightning Network liquidity management technique where node operators send payments to themselves through external routes to shift channel balances.

Lightning Network

Commodity-Linked Synthetics

Digital assets that track the price of physical commodities like gold, silver, or oil through derivative mechanisms rather than direct physical backing.

Stablecoins

D1 term

Death Spiral

A self-reinforcing collapse mechanism in algorithmic stablecoins where falling prices trigger panic redemptions, further crashing the price until the peg breaks irreversibly.

Stablecoins

E3 terms

E-Money Tokens (EMTs)

A type of stablecoin under MiCA regulation that is pegged to a single fiat currency and backed by reserves, functioning as a digital representation of electronic money.

Stablecoins

Eltoo

A proposed Lightning Network channel update mechanism using SIGHASH_ANYPREVOUT that simplifies state management by allowing any later state to replace any earlier state.

Lightning Network

Ephemeral Dust

Temporary dust outputs in Lightning commitment transactions that allow channels to use their full balance without reserving funds for on-chain fees.

Lightning Network

H2 terms

Hodl Invoice

A Lightning invoice where the receiver can delay settlement, enabling escrow-like functionality and conditional payments on the Lightning Network.

Lightning Network

Hybrid Collateral Ratio

A stablecoin design mechanism that dynamically adjusts the mix of asset-backed collateral and algorithmic stabilization to maintain price peg.

Stablecoins

J1 term

Justice Transaction

A penalty transaction that sweeps all funds from a cheating counterparty's Lightning channel, enforcing protocol rules and deterring fraud attempts.

Security

K1 term

Keysend

A Lightning Network payment method that enables spontaneous payments without requiring an invoice from the recipient.

Lightning Network

L2 terms

Liquidation Cascade

A chain reaction of forced collateral liquidations triggered when market crashes push multiple DeFi vaults below their minimum collateralization thresholds simultaneously.

Stablecoins

Loop In/Out

Submarine swap mechanisms for moving funds between on-chain Bitcoin and Lightning Network without custody, enabling non-custodial liquidity management.

Lightning Network

O1 term

Oracle Manipulation

An attack vector where malicious actors distort price feeds used by smart contracts, often to trigger unjust liquidations or exploit arbitrage in collateralized protocols.

Stablecoins

P2 terms

Precision Decay

Cumulative rounding errors in fixed-point arithmetic during multi-hop swaps that can be exploited to drain liquidity pools; a vulnerability class flagged in numerous DeFi security audits.

Stablecoins

Probing

A technique used to discover Lightning Network channel balances and network topology by sending fake payments that reveal routing information.

Lightning Network

R2 terms

Revocation Key

A cryptographic key derived during Lightning Network channel updates that allows a counterparty to claim all channel funds if an old, revoked commitment transaction is broadcast.

Security

Route Hints

Routing information embedded in Lightning invoices that enable payments to nodes with private or unannounced channels.

Lightning Network

S2 terms

Shor's Algorithm Vulnerability

A quantum computing threat to elliptic curve cryptography (ECC) that could theoretically break the digital signatures securing Bitcoin and stablecoin transactions.

Cryptography

Specified Stablecoins

A regulatory classification in Hong Kong for fiat-referenced stablecoins with official currency ties, subject to mandatory licensing requirements.

Stablecoins

T1 term

Trampoline Payments

A Lightning Network routing technique where lightweight clients delegate pathfinding to intermediate nodes, enabling mobile wallets to send payments without maintaining full network state.

Lightning Network

W1 term

Watchtower

An outsourced monitoring service that watches for channel breaches on the Lightning Network and broadcasts penalty transactions to protect users who are offline.

Security