Crypto & DeFi Glossary

Automated Market Maker — a smart contract that prices tokens algorithmically using a liquidity pool instead of an order book.

Annual Percentage Yield — the annualised return on an investment including the effect of compounding.

A large financial institution with a direct agreement to create and redeem ETF shares in bulk directly with the fund issuer.

Information or insight that provides an edge — allowing an investor to identify opportunities before the broader market.

A distribution of free tokens to wallet addresses, typically as a marketing tool or reward for early protocol users.

A distributed ledger that records transactions in chronologically linked blocks, secured by cryptography.

A batch of transactions bundled together and permanently added to the blockchain.

A delta-neutral strategy that profits from the spread between a spot position and its corresponding futures or perpetual contract.

A protocol enabling users to transfer tokens between two different blockchains or between L1 and L2.

A cheap, temporary data storage type introduced to Ethereum in March 2024, designed to make Layer 2 rollup data publication dramatically less expensive.

The rules a blockchain network uses to agree on the valid state of the ledger.

A centralised exchange — a company-operated platform where users deposit funds and trade via a traditional order book.

Assets locked as security against a loan, seized by the protocol if the borrower's position falls below the liquidation threshold.

The number of tokens currently tradeable in the market, excluding locked, vested, or burned tokens.

Decentralised Finance — financial services built on public blockchains, operating without traditional intermediaries.

A decentralised exchange where users trade directly from their wallets via smart contracts, with no custodian.

A settlement mechanism that links the transfer of an asset to the simultaneous transfer of payment, eliminating principal risk.

Decentralised Autonomous Organisation — a member-owned entity governed by smart contracts and on-chain voting.

The guarantee that transaction data has been published and is accessible to anyone who needs to reconstruct or verify the blockchain state.

Do Your Own Research — a reminder that individual investors are responsible for their own due diligence.

The standard interface for fungible tokens on Ethereum and EVM-compatible blockchains.

A change to a blockchain's protocol rules; soft forks are backwards-compatible, hard forks are not.

The point at which a transaction is considered irreversibly confirmed and cannot be altered or reversed.

An uncollateralised DeFi loan that must be borrowed and repaid within a single blockchain transaction.

A periodic payment between long and short perpetual futures holders that keeps the contract price aligned with spot.

Fear, Uncertainty, and Doubt — negative sentiment (sometimes deliberately spread) intended to reduce confidence in an asset.

Fear Of Missing Out — anxiety-driven buying as an asset rises rapidly, often a sign of market overextension.

The unit measuring computational work on Ethereum, paid as a fee to validators for executing transactions.

A token conferring voting rights over a protocol's parameters, upgrades, and treasury.

A fixed-length fingerprint of arbitrary data, used throughout blockchains to link blocks and verify integrity.

A crypto slang term for holding assets long-term rather than selling during volatile markets.

The loss liquidity providers experience when pool token prices diverge, relative to simply holding the tokens.

Know Your Customer / Anti-Money Laundering — identity verification and transaction monitoring required by regulated financial services.

A smart contract holding reserves of two or more tokens that enables decentralised trading and yield for depositors.

A DeFi application that lets users supply assets to earn interest and borrow against collateral without a bank.

The automatic sale of a borrower's collateral when their loan-to-value ratio exceeds the protocol's safety threshold.

Borrowing capital to increase the size of a position beyond what owned funds allow, amplifying both gains and losses.

The base blockchain — the foundational network responsible for consensus, security, and final settlement.

A scaling solution built on top of a Layer 1 blockchain that processes transactions off-chain and posts proofs or data back to L1.

A mechanism that lets users stake tokens and receive a liquid, transferable receipt token in return.

The pool of unconfirmed transactions waiting to be included in a block.

Total market capitalisation — the current price of a token multiplied by its circulating supply.

Maximal Extractable Value — profit captured by reordering, inserting, or censoring transactions within a block.

A fair-value price used by derivatives exchanges to calculate unrealised P&L and trigger liquidations, preventing manipulation by last-traded price.

A computer that participates in a blockchain network by storing and relaying data.

Non-Fungible Token — a unique on-chain asset whose ownership is tracked on a blockchain.

The per-share value of a fund calculated by dividing total assets minus liabilities by shares outstanding.

A service that supplies off-chain real-world data (e.g. asset prices) to smart contracts on-chain.

The total number (or value) of outstanding derivative contracts that have not been settled or closed.

A Layer 2 scaling solution that assumes transactions are valid by default and uses fraud proofs to challenge invalid state transitions within a challenge window.

Using publicly available blockchain transaction data to evaluate market conditions, holder behaviour, and asset flows.

A consensus mechanism requiring miners to solve computationally expensive puzzles to propose new blocks.

A consensus mechanism where validators lock up tokens as collateral to earn the right to propose and attest to blocks.

A secret cryptographic number that proves ownership of a blockchain address and authorises transactions.

The change in an asset's market price caused directly by a single trade.

A derivative contract tracking an asset's price with no expiry date, kept near spot price via a funding rate mechanism.

An exploit where a valid transaction on one chain is rebroadcast on a forked chain to duplicate the transfer.

An automatic adjustment to every holder's token balance, proportionally expanding or contracting supply without changing individual ownership percentages.

A traditional off-chain asset — property, bonds, equity, commodities — represented as a token on a blockchain.

A Layer 2 scaling technique that executes transactions off-chain and posts batched data or proofs to the Layer 1.

A scam where project founders abruptly withdraw liquidity or abandon a project, leaving investors with worthless tokens.

A human-readable backup of a wallet's master private key, typically 12 or 24 words.

The destruction of a portion of a validator's staked tokens as punishment for provably malicious behaviour.

Self-executing code deployed on a blockchain that automatically enforces agreement terms when conditions are met.

A token designed to maintain a stable value, usually pegged 1:1 to a fiat currency like the US dollar.

A legally separate entity created solely to hold specific assets, insulating them from the parent company's balance sheet and insolvency risk.

The difference between the expected price of a trade and the actual execution price, caused by insufficient liquidity.

A market where assets are bought and sold for immediate delivery at the current market price.

Locking up tokens to participate in network consensus or earn protocol rewards.

The centralised server in most Layer 2 rollups that orders transactions before they are batched and posted to Layer 1.

A signed instruction to transfer value or interact with a smart contract, broadcast to the blockchain network.

Total Value Locked — the aggregate value of crypto assets deposited in a DeFi protocol or the sector as a whole.

A digital asset issued on an existing blockchain, representing value, ownership, or utility within a specific ecosystem.

The process of representing ownership of real-world assets (property, bonds, funds) as tokens on a blockchain.

The economic design of a token — supply schedule, distribution, utility, and incentive structure.

The permanent removal of tokens from circulation by sending them to an unspendable address, reducing total supply.

A protocol-initiated replacement of an existing token with a new one, requiring holders to swap old tokens for new within a defined window.

The total value of an asset traded on exchanges over a given period, typically 24 hours.

A smart contract that pools deposited assets, deploys them into a yield strategy, and issues share tokens representing depositors' claims.

A schedule that releases tokens to team members, investors, or advisors gradually over time.

A node that participates in a Proof of Stake network's consensus process by staking tokens to propose and attest to blocks.

Software or hardware that stores cryptographic keys, enabling users to send and receive on-chain assets.

An entity holding a large enough position to meaningfully influence a crypto asset's price through their trading activity.

The practice of moving crypto assets across DeFi protocols to maximise returns from fees, interest, and token rewards.

A Layer 2 scaling solution that uses zero-knowledge validity proofs to cryptographically prove the correctness of off-chain transaction batches to Layer 1.