DeFi Glossary
Your comprehensive guide to decentralized finance terminology. This glossary covers essential DeFi concepts, from basic terms like APY to advanced strategies like yield farming. Whether you’re a DeFi beginner or experienced user, this resource helps you understand the rapidly evolving world of decentralized finance.
Each item is provided with definition, example, related questions and relevant content.
Why This Glossary?
- Expert Insights: Definitions based on real DeFi experience
- Risk Assessment: Each term includes potential risks and considerations
- Practical Examples: Real-world usage examples for better understanding
- Regular Updates: Continuously updated with new DeFi innovations
- Multilingual: Available in English and French
- Forkability: Open source + easy to fork to translate into other languages
This glossary is maintained and regularly updated to reflect the latest DeFi developments. Have a term to suggest? Get in touch.
A
The annual return on investment including compound interest effects
Decentralized exchange using mathematical formulas for pricing instead of order books
Simple annual interest rate without compounding effects
Automatic reinvestment of rewards to maximize compound returns
Free distribution of tokens to wallet addresses
Profiting from price differences of identical assets across markets
Security review of smart contract code to identify vulnerabilities
B
Protocol enabling asset transfers between different blockchains
Collection of transactions bundled together on a blockchain
Obtaining crypto loans by providing collateral to smart contracts
Difference between highest buy price and lowest sell price
Reward program for finding and reporting security vulnerabilities
Difference between highest buy price and lowest sell price
Arbitrage strategy exploiting price differences between spot and futures markets
Token rewards paid to voters for directing gauge emissions to specific pools
C
Method for blockchain networks to agree on transaction validity
Assets deposited as security to back a loan
Number of tokens publicly available and actively trading
Providing liquidity within specific price ranges for higher efficiency
Company-operated exchange controlling user funds with order books
Mathematical formula (x*y=k) used by AMMs for automatic pricing
Borrowing low-yield assets to invest in higher-yield ones for interest differential profit
How effectively a protocol uses deposited capital to generate results
The ability for DeFi protocols to seamlessly integrate and build upon each other
Smart contract where collateral is deposited to mint or borrow stablecoins
D
Blockchain-based organization governed by token holders and smart contracts
Blockchain-based financial system operating without traditional intermediaries
Service that finds the best prices across multiple DEXs for trades
Regular fixed-dollar purchases regardless of price to reduce volatility impact
Exchange operating without central authority using smart contracts
Strategy that eliminates directional price risk through balanced long/short positions
Financial contracts deriving value from underlying assets
Assigning voting power to another party to vote on your behalf
Application running on blockchain rather than centralized servers
When a stablecoin or pegged asset loses its intended price peg
E
Programmable blockchain platform that powers most DeFi applications
Standard for creating fungible tokens on Ethereum
Standard for creating non-fungible tokens on Ethereum
Founders disappearing with investor money after fundraising
Attack exploiting smart contract vulnerabilities to steal funds or cause damage
The rate and schedule at which new tokens are created and distributed
F
Instant uncollateralized loan that must be repaid in the same transaction
Executing ahead of another transaction by paying higher gas fees
Attack using flash loans to manipulate protocols for profit
Periodic payment between perpetual futures traders to maintain price alignment
Self-reinforcing cycle where protocol components amplify each other's growth
G
Token that provides voting rights on protocol governance decisions
Fee paid to execute transactions on Ethereum blockchain
Automated strategy placing multiple orders at price intervals to profit from volatility
Malicious actors gaining voting control to pass harmful proposals
Voting mechanism that directs token emissions to specific liquidity pools
H
Malicious contract that traps user funds with hidden withdrawal restrictions
Numerical indicator of a lending position's safety relative to liquidation threshold
L
Earning token rewards by providing liquidity to DeFi protocols
Smart contract containing funds that enable decentralized trading and lending
Scaling solutions built on top of blockchains to reduce fees and increase speed
Earning interest by lending crypto assets through smart contracts
Percentage of collateral value that can be borrowed
Automatic sale of collateral when loan becomes undercollateralized
Tokens representing a user's share in a liquidity pool
Order to trade at a specific price or better
Order to trade at a specific price or better
Entity that supplies assets to facilitate trading and earn fees
Combining liquidity from multiple sources for better trading execution
Using borrowed funds to amplify trading position size and potential returns
Custom liquidity distribution patterns that automatically adjust with price movements
Chain reaction of liquidations where each one triggers further price drops and more liquidations
Staking tokens while receiving a liquid derivative usable in DeFi
M
Profit extracted by manipulating transaction ordering in blocks
Wallet requiring multiple signatures to authorize transactions
Waiting area for unconfirmed blockchain transactions
Total value of a cryptocurrency (price Γ circulating supply)
Maximum number of tokens that can ever exist
Market's ability to handle large orders without significant price impact
Order to trade immediately at current market price
Market's ability to handle large orders without significant price impact
Order to trade immediately at current market price
Trading with borrowed funds using collateral to control larger positions
Popular browser wallet for interacting with Ethereum and DeFi
Protocol facilitating decentralized lending and borrowing of crypto assets
N
Unique digital tokens representing ownership of specific items
O
Service that provides real-world data like prices to blockchain applications
Real-time list of buy and sell orders organized by price
Real-time list of buy and sell orders organized by price levels
Contracts giving the right to buy/sell assets at specific prices before expiration
Locking more collateral value than the amount borrowed as a safety buffer
P
How much a trade moves the market price of an asset
Deceptive attacks to steal private keys or trick users into malicious transactions
Service providing real-time price data to smart contracts
Derivative contracts that track asset prices without expiration dates
Formal suggestion submitted to DAO community for voting on protocol changes
Secret cryptographic key that controls your cryptocurrency
Liquidity owned by the protocol's treasury rather than rented from external LPs
R
Token with elastic supply that adjusts to maintain price stability
Scam where developers abandon project and steal investor funds
Finding optimal trading paths across multiple liquidity sources
Layer 2 scaling solution that executes transactions off-chain while posting data to Layer 1
Using already-staked assets to secure additional protocols for extra yield
S
Self-executing code that automatically enforces contract terms on blockchain
Cryptocurrency designed to maintain stable value relative to a reference asset
Difference between expected and actual trade execution price
Locking tokens to earn rewards by supporting network or protocol operations
Blockchain tokens that track the price of real-world assets
MEV attack that surrounds victim's trade with buy/sell orders
Automatic sell order triggered when price falls to set level
Penalty where staked tokens are destroyed for validator misbehavior
Direct exchange of one cryptocurrency for another
Recording token holdings at specific block height for fair governance voting
Series of words that can restore access to your cryptocurrency wallet
Profit from issuing stablecoins that cost less to create than their face value
T
Permanent removal of tokens from circulation
Economic design and mechanics of a cryptocurrency token
Total number of tokens that currently exist
Average asset price calculated over time to resist manipulation
Automatic sell order triggered when price rises to target level
Delay mechanism between proposal approval and execution for community review
Pool of funds controlled by DAO for development and ecosystem growth
Total amount of assets deposited and locked in DeFi protocols
V
Network participants who validate transactions in Proof of Stake systems
Automated strategy that pools funds to maximize yields across DeFi protocols
Gradual release of tokens over time according to a schedule
Total amount of an asset traded in a given period
Total amount of an asset traded in a given time period
Locking tokens for extended periods to gain enhanced voting power and rewards
Tokenomics model combining vote-escrow locking with (3,3) cooperative game theory
NFT representing a vote-escrowed token position, making locked positions tradeable
W
Token representing another cryptocurrency on a different blockchain
List of approved addresses for early access to token events
Ethical hacker who finds vulnerabilities to improve security
Tool for storing private keys and managing cryptocurrency