AMM
A smart contract protocol that enables token trading using liquidity pools and a mathematical pricing formula instead of order books.
CDP
A DeFi mechanism where a user locks cryptocurrency collateral to borrow a stablecoin against it.
DAO
A blockchain-based organization governed by token holders through smart contract voting rather than a central authority.
DeFi Lending
Borrowing and lending cryptocurrency through smart contracts without banks or credit checks.
DeFi APY
Converts a DeFi protocol's quoted APR into the effective Annual Percentage Yield, accounting for how often returns are compounded.
Flash Loan
An uncollateralized DeFi loan that must be borrowed and repaid within the same blockchain transaction.
Governance Token
A cryptocurrency token that grants holders voting rights over the rules and direction of a DeFi protocol or DAO.
Impermanent Loss
The percentage value lost by a liquidity provider compared to simply holding the tokens, due to price divergence between the two pooled assets.
Layer 1
The base blockchain network that independently validates and records transactions without relying on another chain.
Layer 2
A secondary network built on top of a Layer 1 blockchain to process transactions faster and at lower cost.
Liquidity Mining
A DeFi incentive mechanism that rewards liquidity providers with governance tokens in addition to trading fees.
Liquidity Pool
A smart contract holding reserves of two or more tokens that enables decentralized trading on an AMM.
LP Token
A token issued to liquidity providers representing their proportional share of a DeFi liquidity pool.
MEV
The profit that block producers can earn by reordering, inserting, or censoring transactions in a block.
Oracle
A service that supplies real-world data — such as asset prices — to smart contracts on a blockchain.
Protocol
A set of smart contracts on a blockchain that provides an automated financial service such as trading, lending, or yield generation.
Rug Pull
A crypto exit scam where developers suddenly withdraw all liquidity or funds and abandon a project, leaving investors with worthless tokens.
Slippage
The difference between the expected price of a trade and the price at which it is actually executed on a DEX.
Staking
Locking cryptocurrency in a proof-of-stake network or DeFi protocol to earn rewards in exchange for validating transactions or providing collateral.
TVL
The total dollar value of assets deposited in a DeFi protocol or across the entire DeFi ecosystem.
Wrapped Token
A token representing another cryptocurrency from a different blockchain, enabling cross-chain use in DeFi.
Yield Farming
Actively moving crypto assets between DeFi protocols to maximize yield through lending, liquidity provision, and staking rewards.
ZK Proof
A cryptographic method that lets one party prove they know something without revealing the underlying information.