📚 Glossary of Terms
📚 Glossary of Terms
OTCM Protocol Whitepaper V6.1 · Groovy Company, Inc. dba OTCM Protocol
📖 Key terminology used throughout the OTCM Protocol whitepaper, organized by domain.
This glossary provides comprehensive definitions for all technical, financial, legal, regulatory, and blockchain-specific terms used throughout this whitepaper. Terms are organized by category for quick reference.
▪️ Technical and Blockchain Terms
OTCM (OVER THE COUNTER MICROCAP): The official name and acronym for Groovy Company, Inc. dba OTCM Protocol, a Wyoming Corporation. OTCM stands for Over the Counter Microcap — directly identifying the protocol's target market: microcap public companies whose shares trade on OTC (Over-the-Counter) markets and whose shareholders have been trapped by illiquidity. OTCM is also the ticker symbol of the protocol's native SPL Token-2022 utility and governance token.
API (APPLICATION PROGRAMMING INTERFACE): A set of protocols and tools that allows different software applications to communicate with each other. Used for integrating third-party services and enabling programmatic access to platform features.
AUTOMATED MARKET MAKER (AMM): A decentralized exchange protocol that uses mathematical formulas (bonding curves) to price assets automatically, eliminating the need for traditional order books. Provides continuous liquidity through algorithmic trading.
BONDING CURVE: A mathematical formula determining token price as a function of cumulative supply. OTCM implements a linear bonding curve: P(n) = P0 + (g × n), where P0 = initial price (0.000001 SOL), g = price gradient (0.0000000079 SOL per token), and n = tokens issued. Price increases monotonically with supply. Post-graduation, pricing transitions to the CPMM constant product formula x × y = k. This is the canonical formula — no sigmoid curve variant exists in the protocol.
CEDEX (CENTRALIZED-DECENTRALIZED EXCHANGE): OTCM's purpose-built securities trading infrastructure achieving simultaneous satisfaction of permissionless trading, securities compliance, and custodial risk elimination. CEDEX is the only exchange purpose-built to maintain all 42 SPL Token-2022 Transfer Hook controls throughout the full token lifecycle, including post-graduation trading.
CIRCUIT BREAKER: Automated trading halt mechanism triggered by extreme price movements or unusual market conditions. Prevents market manipulation and allows time for information dissemination. OTCM implements 2% price impact limits and 30% volume halt thresholds.
CONSENSUS MECHANISM: Method by which blockchain networks achieve agreement on the current state of the ledger. Examples include Proof of Work (PoW), Proof of Stake (PoS), and Solana's Proof of History (PoH).
DAO (DECENTRALIZED AUTONOMOUS ORGANIZATION): An organization represented by rules encoded as computer programs (smart contracts) that are transparent and controlled by organization members rather than centralized leadership. OTCM uses DAO governance for protocol upgrades with 48-hour timelocks and supermajority thresholds.
DEX (DECENTRALIZED EXCHANGE): A cryptocurrency exchange operating without central authority, using smart contracts for peer-to-peer trading. Examples include Uniswap, Raydium, and Orca. Standard DEXs cannot support OTCM's compliance requirements as they do not invoke SPL Token-2022 Transfer Hooks.
GAS FEES: Transaction fees paid to process and validate transactions on blockchain networks. On Solana, these are minimal (~5,000 lamports or ~$0.00025) compared to Ethereum.
HASH/HASHING: Process of converting input data into a fixed-size string of characters using a cryptographic algorithm. Used for data integrity, blockchain security, and immutable audit trails.
LAYER 2: Secondary framework built on top of a Layer 1 blockchain to improve scalability and efficiency. Processes transactions off the main chain while leveraging its security. OTCM Protocol operates as Layer 2 on Solana.
MEV (MINER/MAXIMUM EXTRACTABLE VALUE): Profit miners or validators can extract by reordering, including, or excluding transactions within blocks they produce. OTCM's architecture prevents MEV extraction through Transfer Hooks and Jito bundle integration.
MULTI-SIGNATURE (MULTI-SIG): Security feature requiring multiple cryptographic signatures to authorize a transaction. Used for enhanced security of high-value accounts and emergency protocol overrides.
ORACLE: Service providing external data to blockchain smart contracts, bridging on-chain and off-chain information. OTCM uses oracles for custody verification (every ~400ms), OFAC screening, AML risk scoring, and price feeds.
PBFT (PRACTICAL BYZANTINE FAULT TOLERANCE): Consensus algorithm for distributed systems enabling agreement even when some nodes fail or act maliciously. Used alongside Proof of History in Solana.
PROOF OF HISTORY (POH): Solana's innovation creating a historical record proving events occurred in a specific sequence, enabling high throughput of 65,000+ TPS.
RPC (REMOTE PROCEDURE CALL): Protocol for executing code on remote servers. Solana RPC nodes provide API access to blockchain data and transaction submission.
SMART CONTRACT: Self-executing program on a blockchain that automatically enforces agreement terms when predetermined conditions are met. OTCM uses Rust/Anchor smart contracts on Solana.
SPL TOKEN: Token standard on the Solana blockchain, similar to ERC-20 on Ethereum. SPL Token-2022 extends this with Transfer Hooks enabling compliance enforcement at the transfer primitive.
ST22 (SECURITY TOKEN 2022): OTCM's tokenized securities using the SPL Token-2022 standard with integrated Transfer Hooks for compliance verification. Under the SEC's March 17, 2026 interpretation (Release No. 33-11412), ST22 tokens are formally classified as Digital Securities — financial instruments formatted as crypto assets with ownership recorded on a crypto network.
TPS (TRANSACTIONS PER SECOND): Measure of blockchain throughput capacity. Solana achieves 65,000+ TPS versus Ethereum's ~15 TPS.
TRANSFER HOOK: SPL Token-2022 mechanism executing verification code during token transfers. OTCM implements six sequential hooks enforcing 42 compliance controls atomically on every ST22 transfer.
TWAP (TIME-WEIGHTED AVERAGE PRICE): Price average calculated over a time period. Used by OTCM's circuit breaker to detect abnormal price movements and prevent single-block price manipulation.
▪️ Financial Terms
ACCREDITED INVESTOR: An individual or entity meeting specific SEC criteria under Rule 506(c) of Regulation D, including minimum income thresholds ($200,000 individual / $300,000 joint) or net worth exceeding $1 million excluding primary residence.
APY (ANNUAL PERCENTAGE YIELD): Annualized return rate accounting for compounding. OTCM staking nodes offer 8–60% APY with 2.6-day epochs (140 compounding events annually).
BENEFICIAL OWNERSHIP: The natural person(s) who ultimately owns or controls an investment, even if title is held in another name. SEC requires disclosure of beneficial owners holding more than 5% of public company shares.
BLUE SKY LAWS: State-level securities laws in the United States that regulate the offering and sale of securities to protect investors from fraud. Named after speculative schemes with no more basis than "blue sky."
BOOK-ENTRY: Securities recorded electronically rather than issued as physical certificates. Ownership tracked through electronic records maintained by transfer agents or clearing houses.
CUSIP: Nine-character alphanumeric code identifying North American securities for clearing and settlement. Required for most publicly traded securities.
HOLDING PERIOD: Minimum time securities must be held before they can be sold. Rule 144 requires a six-month holding period for restricted securities.
IMPERMANENT LOSS: Temporary loss experienced by liquidity providers in AMMs when deposited asset prices change compared to holding assets outside the pool.
LIQUIDITY: Ease with which an asset can be bought or sold without affecting its price. High liquidity means minimal price impact from trades. OTCM's Federated Liquidity Protocol maximizes liquidity per issuer.
LIQUIDITY POOL (LP): Smart contract containing paired assets enabling decentralized trading. Users provide liquidity in exchange for fees from trades.
LP (LIQUIDITY PROVIDER): Entity supplying assets to a liquidity pool, earning fees from trades executed against the pool.
MARKET CAP (MARKET CAPITALIZATION): Total value of all tokens or shares in circulation, calculated by multiplying current price by circulating supply.
PARI PASSU: Latin term meaning "equal footing" — securities or creditors having equal rights to payment or assets.
SLIPPAGE: Difference between expected and actual trade price due to price movement between order placement and execution.
TOTAL VALUE LOCKED (TVL): Total value of assets deposited in a DeFi protocol, indicating protocol size and user trust.
TRANSFER AGENT: Entity maintaining shareholder records and processing transfers for publicly traded companies. Must be SEC-registered. Empire Stock Transfer serves as OTCM's transfer agent for Preferred Series M shares and ST22 tokens. Pacific Stock Transfer serves as transfer agent for common shares.
VESTING: Process by which tokens or shares become available to a recipient over time rather than immediately. OTCM uses a five-phase vesting schedule: 20% at mint, 20% at graduation, then 20% every 6 months post-graduation.
YIELD FARMING: Practice of lending or staking cryptocurrency in exchange for interest or new tokens as rewards.
▪️ Legal and Regulatory Terms
AML (ANTI-MONEY LAUNDERING): Legal and regulatory procedures designed to prevent criminals from disguising illegally obtained funds as legitimate income. Includes KYC procedures, transaction monitoring, and suspicious activity reporting requirements.
BSA (BANK SECRECY ACT): U.S. legislation (31 U.S.C. § 5311) requiring financial institutions to assist in detecting money laundering through record-keeping and reporting requirements.
CCPA (CALIFORNIA CONSUMER PRIVACY ACT): California state law providing consumers rights over personal information collected by businesses, including right to know, delete, and opt-out of sale of personal information.
CFR (CODE OF FEDERAL REGULATIONS): Codification of U.S. federal agency regulations. Securities regulations appear in Title 17 CFR.
DIGITAL SECURITIES (TOKENIZED SECURITIES): Formal asset class established by the SEC and CFTC in Release No. 33-11412 (March 17, 2026), defined as: "Financial instruments enumerated in the definition of 'security' that is formatted as or represented by a crypto asset, where the record of ownership is maintained in whole or in part on or through one or more crypto networks." ST22 tokens are Digital Securities under this definition.
DTC (DEPOSITORY TRUST COMPANY): Subsidiary of DTCC providing custody and book-entry transfer services for eligible securities. Most U.S. publicly traded securities are DTC-eligible.
EDGAR (ELECTRONIC DATA GATHERING, ANALYSIS, AND RETRIEVAL): SEC's electronic filing system where companies submit required disclosures. Public database accessible for researching company filings. Groovy Company, Inc. dba OTCM Protocol — CIK: 1499275.
FATCA (FOREIGN ACCOUNT TAX COMPLIANCE ACT): U.S. legislation requiring foreign financial institutions to report information about accounts held by U.S. taxpayers to the IRS.
FATF (FINANCIAL ACTION TASK FORCE): Intergovernmental AML/CFT policy body setting international standards for combating money laundering and terrorist financing.
FINCEN (FINANCIAL CRIMES ENFORCEMENT NETWORK): U.S. Treasury bureau collecting and analyzing information about financial transactions to combat money laundering, terrorist financing, and other financial crimes.
FINRA (FINANCIAL INDUSTRY REGULATORY AUTHORITY): Self-regulatory organization overseeing broker-dealers in the United States. Licenses securities professionals and enforces industry rules.
FORM D: SEC filing required for companies raising capital under Regulation D exemptions. Must be filed within 15 days of first sale.
GDPR (GENERAL DATA PROTECTION REGULATION): European Union regulation on data protection and privacy, granting individuals control over their personal data.
HOWEY TEST: Four-part test from the 1946 Supreme Court case SEC v. W.J. Howey Co. determining whether a transaction qualifies as an "investment contract" and therefore a security: (1) investment of money, (2) in a common enterprise, (3) with expectation of profits, (4) from efforts of others. The SEC's March 17, 2026 interpretation (Release No. 33-11412) clarified how the Howey test applies to crypto assets and established conditions under which an investment contract can terminate.
KYC (KNOW YOUR CUSTOMER): Process of verifying client identity to prevent fraud, money laundering, and terrorist financing. Includes collecting identification documents and verifying information.
OFAC (OFFICE OF FOREIGN ASSETS CONTROL): U.S. Treasury office administering and enforcing economic sanctions against targeted foreign countries, entities, and individuals. OTCM screens all transfers against the OFAC SDN list via Transfer Hook 2.
PCAOB (PUBLIC COMPANY ACCOUNTING OVERSIGHT BOARD): Organization overseeing audits of public companies to protect investors. Auditors of public companies must be PCAOB-registered.
REGULATION A+: SEC regulations (17 CFR § 230.251–263) permitting offerings up to $75M annually to both accredited and non-accredited investors, subject to investment limits for non-accredited participants.
REGULATION D: SEC regulation providing exemptions from securities registration requirements for private offerings. OTCM utilizes Rule 506(c) permitting unlimited-dollar offerings to verified accredited investors with general solicitation.
REGULATION S: SEC regulations (17 CFR § 230.901–905) for offshore securities offerings to non-U.S. persons. OTCM's Reg S framework governs international investor participation.
RELEASE NO. 33-11412: The SEC and CFTC joint interpretation published March 17, 2026, establishing a formal taxonomy for crypto assets under federal securities law. Defines five categories: Digital Commodities, Digital Collectibles, Digital Tools, Stablecoins (GENIUS Act), and Digital Securities. ST22 tokens are formally classified as Digital Securities under this release.
RULE 144: SEC rule allowing public resale of restricted and control securities if certain conditions are met, including holding periods (minimum six months for restricted securities).
RULE 15C2-11: SEC rule requiring broker-dealers to review issuer information before publishing quotations for OTC securities. Loss of 15c2-11 eligibility is the primary trigger for OTC market abandonment that OTCM Protocol addresses.
SAR (SUSPICIOUS ACTIVITY REPORT): FinCEN filing for suspected financial crime, required when transactions appear suspicious or exceed reporting thresholds ($5,000+).
SDN (SPECIALLY DESIGNATED NATIONALS): OFAC list of individuals and entities with whom U.S. persons are prohibited from conducting business. Checked on every OTCM transfer via Transfer Hook 2.
SEC (SECURITIES AND EXCHANGE COMMISSION): U.S. federal agency regulating securities markets and protecting investors through disclosure requirements and enforcement. Primary regulatory authority for OTCM Protocol and ST22 Digital Securities.
SEC CATEGORY 1 MODEL B: OTCM's regulatory model under the SEC's tokenized securities framework — Empire Stock Transfer maintains the authoritative master securityholder file; the Solana blockchain serves as the notification layer. Established by the January 28, 2026 Joint Staff Statement and further validated by Release No. 33-11412 (March 17, 2026).
TA-1: Transfer Agent Registration Form filed with the SEC for transfer agent compliance and registration.
U.S.C. (UNITED STATES CODE): Codification of U.S. federal statutory law. Securities laws appear in Title 15 U.S.C.
▪️ Blockchain and Cryptocurrency Terms
CLIFF (VESTING): A period before any vested shares or tokens become available. After the cliff period, vesting may continue on a schedule. Commonly used to ensure long-term commitment.
DEFI (DECENTRALIZED FINANCE): Financial services using smart contracts on blockchains, eliminating intermediaries like banks or brokers. Includes lending, borrowing, trading, and yield farming.
DIGITAL ASSET: Any asset that exists in digital form and comes with the right to use. Includes cryptocurrencies, tokens, NFTs, and digital representations of traditional assets. Under the March 17, 2026 SEC interpretation, digital assets are now classified into five formal categories.
FIAT CURRENCY: Government-issued currency not backed by a physical commodity like gold. Examples include USD, EUR, GBP. Term often used in crypto to distinguish from digital assets.
FUNGIBLE: Property of an asset where individual units are interchangeable and indistinguishable. Dollars and most cryptocurrencies are fungible; NFTs are non-fungible.
GOVERNANCE TOKEN: Token granting holders voting rights in protocol decisions. Used in DAOs for decentralized decision-making. The OTCM utility token provides governance rights, fee discounts (10–50%), and staking eligibility. Under the SEC's March 17, 2026 Digital Tools category, governance tokens performing practical functions may not constitute securities — OTCM's classification is under legal review.
GRADUATION: Irreversible transition from bonding curve pricing to CPMM trading in OTCM Protocol. Occurs when market capitalization reaches the $250,000 threshold. Bonding curve funds migrate atomically to a permanently locked CPMM liquidity pool.
ICO (INITIAL COIN OFFERING): Fundraising mechanism where new cryptocurrency tokens are sold to investors. Similar to an IPO but for digital assets rather than traditional securities.
NFT (NON-FUNGIBLE TOKEN): Unique digital asset representing ownership of a specific item or content, not interchangeable with other tokens.
OTCM LP (OTCM LIQUIDITY POOL): Unified capital reserve serving all ST22 tokens through four accumulation mechanisms: bonding curve graduations, trading fees, staking reinvestment, and permanent locks.
PRIVATE KEY: Cryptographic key allowing control of a blockchain wallet and authorization of transactions. Must be kept secret. OTCM wallets are non-custodial — private keys are generated and stored on the user's device.
PUBLIC KEY: Cryptographic identifier serving as a wallet address for receiving cryptocurrency. Can be shared publicly.
RUG PULL: Scam where developers abandon a project and steal investor funds, typically by removing liquidity from pools. OTCM's permanent liquidity locks — LP tokens burned to the dead address — make rug pulls mathematically impossible.
SANDWICH ATTACK: MEV attack where an attacker places orders before and after a victim's transaction to profit from the price movement they cause. OTCM's 2% price impact circuit breaker and Jito bundle integration prevent this attack vector.
SEED PHRASE: Series of words serving as the master key for a cryptocurrency wallet. Anyone with the seed phrase can access wallet funds.
SERIES M SHARES: Preferred Series "M" shares — non-voting, non-dividend preferred shares created specifically for tokenization and permanently deposited with Empire Stock Transfer under irrevocable custody. Each Series M share is represented 1:1 by one ST22 Security Token.
SLASHING: Penalty mechanism in Proof of Stake networks where validators lose a portion of staked tokens for malicious or negligent behavior.
SOL: Native cryptocurrency of the Solana blockchain, used for transaction fees and staking.
SOLANA: High-performance blockchain supporting 65,000+ TPS with ~400ms block times using Proof of History consensus. OTCM Protocol's Layer 1 infrastructure blockchain.
SOLST (DEPRECATED): Legacy term for ST22 Security Tokens — no longer used. Current official designation is ST22 (Security Token 2022). Retained for historical reference only.
ST22 (SECURITY TOKEN 2022): OTCM's tokenized securities using the SPL Token-2022 standard. Under the SEC's March 17, 2026 interpretation (Release No. 33-11412), ST22 tokens are formally classified as Digital Securities — financial instruments formatted as crypto assets with ownership recorded on a crypto network, backed 1:1 by Preferred Series M shares held in irrevocable custody at Empire Stock Transfer.
STAKING: Locking cryptocurrency to support network operations in exchange for rewards. OTCM staking nodes provide 8–60% APY with 2.6-day epochs.
WALLET: Software or hardware storing private keys for accessing and managing cryptocurrency. Types include hot (online) and cold (offline) wallets. OTCM provides purpose-built iOS and Android securities wallets with embedded KYC/AML compliance.
WASH TRADING: Illegal practice of buying and selling the same asset to create a misleading appearance of market activity. OTCM's AML analytics scoring and circuit breakers detect and prevent wash trading patterns.
WEB3: Concept of a decentralized internet built on blockchain technology, emphasizing user ownership and control of data.
WHALE: Individual or entity holding large amounts of cryptocurrency capable of significantly impacting market prices. OTCM's 4.99% wallet concentration limit and 30% volume halt circuit breaker protect against whale manipulation.
▪️ SEC Filing Terms
10-K: Annual report required by the SEC providing a comprehensive overview of a company's business, financial condition, and results of operations.
10-Q: Quarterly report required by the SEC providing unaudited financial statements and updates on a company's financial position.
8-K: Current report filed with the SEC announcing major events or corporate changes of importance to shareholders.
Groovy Company, Inc. dba OTCM Protocol · Wyoming Corporation · invest@otcm.io · otcm.io