DeFi
Decentralized financial protocols for lending, trading, and yield generation.
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APY (Annual Percentage Yield)
The annualized rate of return on an investment accounting for compound interest, showing total earnings over a year including reinvested gains.
Collateral
Assets deposited as security for a loan. In DeFi lending protocols, borrowers must deposit collateral worth more than they borrow. If collateral value drops too low, it gets liquidated to repay the loan.
Liquidity
Liquidity refers to how easily an asset can be bought or sold without significantly affecting its price, or the availability of assets in a market or liquidity pool to facilitate trading.
TVL (Total Value Locked)
The total dollar value of assets deposited in a DeFi protocol or across the entire DeFi ecosystem, used as a key metric for protocol adoption and market share.
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AMM
Automated Market Maker - a decentralized exchange protocol that uses mathematical formulas and liquidity pools to price assets and execute trades without traditional order books.
DeFi
Decentralized Finance—a category of financial applications built on blockchain that provide services like lending, borrowing, and trading without traditional intermediaries.
DeFi Composability
The ability of different DeFi protocols to combine and interact seamlessly, enabling complex strategies using multiple protocols in single transactions and creating compound value.
Escrow
A neutral third party holding funds during a transaction until conditions are met, enabling trustless transactions between parties who don't trust each other.
Impermanent Loss
The temporary loss in dollar value when providing liquidity to an automated market maker (AMM) compared to simply holding the tokens. Occurs when token prices diverge from the deposit ratio.
Liquid Staking Token
A token representing staked assets that can be traded or used in DeFi while the underlying assets remain staked and earning staking rewards.
Liquidation
The automatic sale of collateral when a borrower's position falls below required thresholds in DeFi lending protocols, protecting lenders from default risk.
Liquidity Mining
Incentive programs where protocols reward users for providing liquidity to trading pools or lending protocols, typically with governance tokens or yield farming rewards.
Liquidity Pool
Smart contracts holding reserves of two or more tokens that enable decentralized trading through automated market makers, with liquidity providers earning fees from trades.
Restaking
Staking the same cryptocurrency across multiple protocols or services, earning additional yields by securing additional networks without increasing capital, though introducing correlated slashing risks.
Staking
Locking up cryptocurrency tokens to support blockchain network operations and earn rewards, serving as collateral for transaction validation in Proof of Stake systems.
Yield Curve
A graph showing interest rates (yields) across different maturities, used in DeFi to understand lending rates and market expectations about future rates and economic conditions.
Yield Farming
The practice of moving cryptocurrency between DeFi protocols to maximize returns. Yield farmers actively seek the highest yields through lending, liquidity provision, and staking strategies.
Zero-Coupon Bond
A financial instrument that pays no interest during its term but is sold at a significant discount to its face value, with profit made on the difference (redemption yield).
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Atomic Swap
A peer-to-peer exchange of cryptocurrencies across different blockchains without intermediaries, using smart contracts to ensure both parties complete transaction or both are refunded.
Curve Bonding
A DeFi mechanism where tokens are minted and burned along a mathematical curve, enabling continuous price discovery and automatic market making without liquidity pools.
Flash Loan
A type of uncollateralized loan that must be borrowed and repaid within a single blockchain transaction. If repayment fails, the entire transaction reverts as if it never happened.
Liquidation Cascade
A chain reaction where liquidations of one position trigger liquidations of connected positions, potentially causing systemic failures and contagion across protocols.