Basis Point
Basis Point (bps)
One hundredth of one percentage point, written as bps
Definition
Basis Point means one hundredth of one percentage point, written as bps. In DeFi, the concept matters because it affects risk, return, liquidity, governance, or execution assumptions.
Basis Point is a DeFi term used to understand one hundredth of one percentage point, written as bps.
Example
A fee increase from 0.05% to 0.30% is an increase of 25 basis points.
How it works
In practice, the concept shows up like this: A fee increase from 0.05% to 0.30% is an increase of 25 basis points.
Why it matters
Basis Point matters because small misunderstandings can turn into bad pricing, liquidation, governance, custody, or smart-contract risk.
What to check
Identify which contract, validator, oracle, admin key, or process can still affect outcomes. The main checks are: Misreading percentage changes; Underestimating fee drag; Confusing bps with percent.
Risks to Consider
- Misreading percentage changes
- Underestimating fee drag
- Confusing bps with percent
Common Questions
What does Basis Point mean in DeFi?
Basis Point means one hundredth of one percentage point, written as bps.
How is Basis Point used in practice?
A practical example: A fee increase from 0.05% to 0.30% is an increase of 25 basis points.
What should I check before relying on Basis Point?
Identify which contract, validator, oracle, admin key, or process can still affect outcomes. The main checks are: Misreading percentage changes; Underestimating fee drag; Confusing bps with percent.