> For the complete documentation index, see [llms.txt](https://help.rails.xyz/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://help.rails.xyz/support/faqs/general-questions.md).

# General Questions

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<summary>What does custody mean?</summary>

In [digital asset](#user-content-fn-1)[^1] trading, custody refers to who controls the cryptographic [private keys](https://www.investopedia.com/terms/p/private-key.asp) that give access to, and move, your assets. Unlike a bank, which holds cash or share records on your behalf, digital assets live on public blockchains, and not private ledgers.

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<summary>What is a smart contract?</summary>

A **smart contract** is a self-executing digital agreement written directly into code on a blockchain.

Instead of relying on a traditional middleman—like a centralized exchange, broker, or bank—to hold funds and clear transactions, a smart contract automatically executes and enforces actions as soon as predefined conditions are met.

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<summary>What is collateral?</summary>

Collateral is the financial backing required to open and maintain leveraged positions.

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<summary>What are gas fees?</summary>

Gas fees are the mandatory transaction fees paid to process actions on a blockchain network.

* Why they exist: Gas fees compensate network validators for processing transactions and prevent spam on the blockchain.
* Paid in Native Assets: Gas fees are paid in the native currency of the network you are using (e.g., ETH on Ethereum and Arbitrum).
* Layer 2 Savings: Depositing from Layer 2 networks (for example Arbitrum) incurs significantly lower gas fees — often just a few cents — compared to using the Ethereum Mainnet.

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<summary>What is bridging and why is it needed?</summary>

Bridging is the process of moving assets (like USDT) or data between blockchains. Since networks like Ethereum and Stellar operate independently and can’t communicate directly, a bridge enables them to transfer tokens or information across chains.

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<summary>What is a Layer 1 vs Layer 2 network?</summary>

Layer 1 is the main blockchain network, like Ethereum or Bitcoin, where transactions and data are stored directly on the chain. Layer 1 is secure and decentralized but can be slower and more expensive as more people use it.

Layer 2 is built on top of Layer 1 to make things faster and cheaper. It processes transactions off the main chain and then sends a summary back to Layer 1. This helps reduce fees and speeds up transactions while still using the security of the main blockchain.

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[^1]: Such as digital currencies, stablecoins or tokenized securities.