DeFi Glossary (Important!)

Audit

An audit is an informal or formal, either an internal or independent comprehensive or partial analysis of a product, process, system, or company. This audit involves a profound look at the strengths, weaknesses, structure,opportunitiesand vulnerabilities of whatever is being audited.

Automated Market Maker (AMM)

An automated market maker (AMM) is a decentralized exchange (DEX) protocol kind relying on a mathematical formula to set price of the assets. Assets here are priced on the basis ofa pricing algorithm.

APR (Annual Percentage Rate)

The term annual percentage rate (APR) determines rate charged for borrowing or earning money annually. APR represents a percentage of yearly fund cost of over the period for a loan or income which is earned on an investment.

APY (Annual Percentage Yield)

The annual percentage yield (APY) represents the real rate of return which is earned in a year on an investment or a savings deposit through aneffect of compounding interest. The more frequent the interest compounding is, the better are the returns.

Beta code/Beta version

It is the release of software to some big group of users for trying within some conditions. Beta versions arefairly close in lookusually and go through in-housealpha testing. They give feels of using the final product.

Compound Interest

Compounding is the reinvestment process to generate additional earning of an asset's earnings over time either with the help of interest or capital gains. Compounding generated earnings from both an investment’s initial principal as well as the accumulated earnings from the preceding periods.

Fair Launch Token/Coin

This concept lets owners to not seek an investment made from outsiders or to pre-mine, pre-sale or hold back coin shares and/or token's launch. This fair launch prevents participants from getting their token from being diluted by the founders or pre-investors teams.

Impermanent Loss

Impermanent loss is the concept happening when the price assets changes comparatively to prices you first deposited then by provide liquidity to some liquidity pool. The grander this change is, the more becomes the exposure chance to the impermanent loss.

Liquidity Pools

Liquidity pools are pools of tokens smartly locked in a contract. They are used to facilitate trading by providing liquidity and are utilised by some DEXesextensively. A single liquidity pool holds 2 tokens, creating ways for a new market for facilitating those two tokens.

Liquidity Provider (LP) Tokens

LP tokensare received by the liquidity provider (LP) in proportion to the amount of liquidity they had supplied to the pool.

Slippage

Slippage happen when a price difference is observed compared to the amount of an original market order or some price actually paid for an asset (e.g., token).

Staking (Frying)

Also known as the farming/liquidity mining for DeFi, Staking means the act of staking some cryptocurrency deposit for farm-yielding an additional cryptocurrency via the offerings ofCeFi or DeFi staking.

Subsidized gas

It is a fee on the high gas costs which generate profitable transactions and are found critical to the vault's internal functioning.

Vaults

Vaults is powered hedging strategies known as decentralized smart contract. Vaults manageand utilise your assets for ensuring the best yield.