DeFi & Crypto
Glossary
New to DeFi? Our glossary explains the terms you need to understand Bitcoin-backed lending, from APY to liquidation thresholds.
Lending & Borrowing
All Terms
Blockchain & Networks
Account Abstraction
A blockchain upgrade that makes wallets programmable by allowing smart contract logic to control account validation and transaction execution.
DeFi Fundamentals
Airdrop
A distribution of free tokens to wallet addresses, typically used to reward early users or decentralize protocol governance.
Blockchain & Networks
AML (Anti-Money Laundering)
AML refers to laws and procedures that prevent the use of financial systems for money laundering and illicit finance.
DeFi Fundamentals
Arbitrage
Arbitrage is the strategy of profiting from price differences for the same asset across different markets or exchanges.
Blockchain & Networks
Atomic Settlement
A transaction mechanism that guarantees all parts of an exchange either complete simultaneously or revert entirely, eliminating settlement risk.
DeFi Fundamentals
Automated Market Maker (AMM)
An automated market maker is a smart contract that algorithmically prices and trades tokens using pooled liquidity instead of order books.
Risk & Security
Bad Debt
Bad debt is outstanding loan value in a DeFi protocol that cannot be recovered because the borrower's collateral no longer covers the debt.
Bitcoin & Crypto
Bitcoin (BTC)
Bitcoin is the first decentralized cryptocurrency, operating on a peer-to-peer network with a fixed supply of 21 million coins.
Bitcoin & Crypto
Block Reward
A block reward is the cryptocurrency earned by a miner for successfully adding a new block of transactions to a blockchain.
Blockchain & Networks
Blockchain
A blockchain is a distributed, immutable digital ledger that records transactions across a decentralized network of computers.
Blockchain & Networks
Bridge
A protocol that connects separate blockchains, enabling users to transfer tokens and data across networks.
Risk & Security
Bug Bounty
A bug bounty is a reward program that pays security researchers for responsibly disclosing vulnerabilities in smart contracts or protocol code.
Blockchain & Networks
Centralized Exchange (CEX)
A custodial crypto trading platform operated by a central company that matches buy and sell orders on behalf of users.
DeFi Fundamentals
Composability
Composability is the capacity for DeFi protocols to interconnect and build on each other like modular, permissionless building blocks.
Risk & Security
Contagion Risk
Contagion risk is the danger that financial distress at one institution or protocol spreads to others through shared exposures and market linkages.
Risk & Security
Counterparty Risk
Counterparty risk is the possibility that the other party in a financial agreement will default on their obligations.
Risk & Security
Credit Risk
The possibility that a borrower will fail to repay their debt, resulting in financial loss for the lender or protocol.
Blockchain & Networks
Cryptocurrency
Cryptocurrency is a digital currency secured by cryptography that operates on decentralized blockchain networks without a central authority.
Stablecoins
DAI
DAI is a decentralized stablecoin pegged to the U.S. dollar, generated through over-collateralized crypto vaults on the MakerDAO protocol.
DeFi Fundamentals
DAO
A decentralized autonomous organization is an entity governed by smart contract rules and community token-holder votes rather than centralized leadership.
DeFi Fundamentals
Decentralized Exchange (DEX)
A decentralized exchange is a peer-to-peer trading platform powered by smart contracts that allows users to swap tokens without a central intermediary.
DeFi Fundamentals
Decentralized Finance (DeFi)
An ecosystem of financial applications built on blockchains that use smart contracts to provide services without traditional intermediaries.
Risk & Security
Default
The failure of a borrower to meet their debt obligations, potentially resulting in bad debt for the lending protocol.
DeFi Fundamentals
DeFi Protocol
A DeFi protocol is a set of smart contracts on a blockchain that delivers financial services like lending, trading, or yield without centralized intermediaries.
Blockchain & Networks
Digital Wallet
A digital wallet is software or hardware that stores the cryptographic keys needed to send, receive, and manage cryptocurrency.
Blockchain & Networks
ERC-20
The standard interface for fungible tokens on Ethereum, defining common rules for transfer, approval, and balance queries.
DeFi Fundamentals
ERC-4626
An Ethereum token standard that creates a unified interface for tokenized vaults, standardizing deposit, withdrawal, and yield accounting.
Blockchain & Networks
Ethereum (ETH)
Ethereum is a programmable blockchain platform that powers smart contracts and serves as the foundation for most decentralized finance applications.
DeFi Fundamentals
Flash Loan
An uncollateralized DeFi loan that must be borrowed and repaid within a single blockchain transaction.
Risk & Security
Flash Loan Attack
A flash loan attack uses uncollateralized, single-transaction borrowing to exploit pricing or logic flaws in DeFi protocols.
Risk & Security
Front-Running
Front-running is the act of placing a transaction ahead of a known pending trade to profit from its expected price impact.
Blockchain & Networks
Gas Fee
A gas fee is the transaction cost paid to validators for processing and confirming operations on a blockchain network.
DeFi Fundamentals
Governance Token
A governance token is a cryptocurrency that gives holders voting power over a DeFi protocol's decisions and future development.
Bitcoin & Crypto
Hash Rate
Hash rate is a measure of the computational power used to mine and process transactions on a proof-of-work blockchain.
Risk & Security
Impermanent Loss
The temporary reduction in value liquidity providers face when token prices in a pool diverge from their deposit-time ratio.
Risk & Security
Insurance Fund
An insurance fund is a protocol-held reserve that absorbs bad debt and liquidation shortfalls to protect depositors from losses.
Blockchain & Networks
KYC (Know Your Customer)
KYC is the identity verification process that financial platforms use to confirm user identities and comply with regulations.
Blockchain & Networks
Layer 2
A secondary protocol built on top of a base blockchain that increases transaction throughput and reduces fees.
DeFi Fundamentals
Lending Pool
A lending pool is a smart-contract reserve where deposited assets are aggregated so borrowers can draw funds against collateral and lenders earn interest.
DeFi Fundamentals
Lending Protocol
A lending protocol is a smart-contract-based application that facilitates decentralized borrowing and lending of crypto assets without intermediaries.
DeFi Fundamentals
Liquid Staking
A mechanism that lets users stake crypto assets while receiving a tradable derivative token representing their staked position.
DeFi Fundamentals
Liquidity Pool
A liquidity pool is a smart contract holding pooled tokens that enables decentralized trading, lending, and other DeFi operations.
DeFi Fundamentals
Liquidity Provider
A liquidity provider is a user who deposits tokens into a DeFi pool to enable trading or lending and earns fees in return.
Risk & Security
Margin Call
A margin call is a notification or trigger indicating that a borrower must add collateral or reduce debt to avoid liquidation.
Risk & Security
MEV
Maximal Extractable Value is the profit block producers can earn by strategically ordering transactions within a block.
Bitcoin & Crypto
Mining
Mining is the process of using computational power to validate transactions and secure a proof-of-work blockchain in exchange for rewards.
DeFi Fundamentals
Money Lego
Money legos are composable DeFi protocols that function as modular building blocks, enabling developers to combine financial services freely.
Blockchain & Networks
Multisig Wallet
A multi-signature wallet requires approval from multiple private key holders before any transaction can be executed.
DeFi Fundamentals
Oracle
A service that delivers external real-world data, such as asset prices, to smart contracts on a blockchain.
Risk & Security
Oracle Manipulation
Oracle manipulation is an attack that distorts external price feeds to exploit DeFi protocols relying on inaccurate asset valuations.
Blockchain & Networks
Order Book
An order book is a real-time ledger of buy and sell orders used by exchanges to match trades at specified prices.
DeFi Fundamentals
Price Feed
A data stream delivered by oracles that provides real-time asset prices to on-chain smart contracts.
Blockchain & Networks
Private Key
A private key is a secret cryptographic code that proves ownership of a blockchain address and authorizes transactions from it.
Risk & Security
Proof of Reserves
A cryptographic verification method that proves a centralized platform holds enough assets to back all customer deposits.
Blockchain & Networks
Proof of Stake (PoS)
Proof of Stake is a consensus mechanism where validators secure a blockchain by staking cryptocurrency as collateral rather than mining with computational power.
Bitcoin & Crypto
Proof of Work (PoW)
Proof of Work is a consensus mechanism where miners solve computational puzzles to validate transactions and secure the blockchain.
Risk & Security
Protocol Risk
Protocol risk is the possibility of financial loss caused by vulnerabilities, design flaws, or governance failures within a DeFi application.
DeFi Fundamentals
Real-World Assets (RWA)
Physical or traditional financial assets that have been tokenized and represented on a blockchain for use in decentralized finance.
Risk & Security
Rehypothecation
Rehypothecation is the practice of reusing collateral that has been pledged by a borrower for other financial activities, amplifying both capital efficiency and risk.
DeFi Fundamentals
Restaking
A mechanism that lets already-staked crypto assets provide security to additional protocols, generating extra yield while compounding risk.
Blockchain & Networks
Rollup
A Layer 2 scaling technique that bundles multiple transactions off-chain and posts compressed proofs to the base blockchain.
Risk & Security
Sandwich Attack
A sandwich attack exploits a pending DEX trade by placing buy and sell orders around it to extract profit from the price movement.
Blockchain & Networks
Seed Phrase
A seed phrase is a series of 12 or 24 words that acts as a master backup to recover a cryptocurrency wallet and all its private keys.
Blockchain & Networks
Self-Custody
Self-custody is the practice of holding your own cryptocurrency private keys rather than entrusting them to a third party.
Risk & Security
Slashing
Slashing is a penalty imposed on proof-of-stake validators who act maliciously or fail to perform their duties properly.
DeFi Fundamentals
Slippage
The difference between the expected price of a crypto trade and the actual execution price, caused by liquidity constraints or market movement.
DeFi Fundamentals
Smart Contract
A self-executing program on a blockchain that automatically enforces agreement terms when predefined conditions are satisfied.
Risk & Security
Smart Contract Audit
A smart contract audit is an independent security review of on-chain code designed to identify vulnerabilities before they can be exploited.
Stablecoins
Stablecoin
A cryptocurrency designed to maintain a stable value by pegging its price to an external reference like the US dollar.
DeFi Fundamentals
Staking
The process of locking cryptocurrency to help secure a proof-of-stake blockchain and earn rewards in return.
Risk & Security
Systemic Risk
Systemic risk is the threat that a failure in one protocol or asset triggers cascading losses across the broader DeFi ecosystem.
DeFi Fundamentals
Time-Lock
A time-lock is a smart contract mechanism that enforces a mandatory delay before approved transactions or governance actions can be executed.
Blockchain & Networks
Token
A token is a digital asset created on an existing blockchain using smart contract standards, serving purposes like governance, utility, or value transfer.
DeFi Fundamentals
Tokenized Securities
Traditional financial instruments such as stocks and bonds that are issued and traded as digital tokens on a blockchain.
DeFi Fundamentals
Tokenomics
Tokenomics is the study of a cryptocurrency token's economic design, including its supply, distribution, utility, and incentive mechanisms.
DeFi Fundamentals
Total Value Locked (TVL)
Total Value Locked is the combined dollar value of all crypto assets deposited in a DeFi protocol's smart contracts.
Blockchain & Networks
Transaction
A transaction is a cryptographically signed operation that records a transfer of value or smart contract interaction on a blockchain.
Stablecoins
USDC
USDC is a dollar-backed stablecoin issued by Circle that maintains a 1:1 peg to the U.S. dollar through cash and Treasury reserves.
Stablecoins
USDT (Tether)
USDT (Tether) is the largest stablecoin by market cap, pegged to the U.S. dollar and widely used for trading and DeFi lending.
Blockchain & Networks
Validator
A network participant that verifies transactions and produces new blocks on a proof-of-stake blockchain by staking tokens.
Bitcoin & Crypto
Wrapped Bitcoin (WBTC)
Wrapped Bitcoin (WBTC) is an ERC-20 token backed 1:1 by Bitcoin, enabling BTC holders to access Ethereum-based DeFi protocols.
DeFi Fundamentals
Yield Farming
Yield farming is a DeFi strategy where users earn additional token rewards by providing liquidity or staking assets across protocols.
Blockchain & Networks
Zero-Knowledge Proof
A cryptographic technique that proves a statement is true without revealing any of the underlying data used in the proof.