DeFi vocabulary at a glance from beginner to master

DApp refers to decentralized applications and is the foundation of all DeFi. Like a DAO, a DApp is essentially an application that also runs itself, without a manager or middleman, allowing users to transfer money between programs.

DeFi vocabulary at a glance from beginner to master

Glossary 1: TVL

TVL stands for Total Value Locked and refers to the total value of digital assets pledged by a user in a crypto pass-through program. The growth of TVL is often used as a proxy for the upside of a pass-through project. However, with the rise of liquidity mining and the emergence of complex financial applications such as Aave and YFI that offer lock-in and lending capabilities, it is difficult to use simple TVL as a single indicator of a crypto pass-through project.

Glossary 2: Fair Start

Fair launch, also known as “fair launch” in English, means that when a project issues tokens, everyone has a fair chance to participate, mostly by providing liquidity contributions. This model is different from the classical VC financing, which tends to have the majority of tokens allocated to investment institutions and teams, and the holdings are relatively concentrated. However, most of the so-called “fair start-ups” are only procedurally fair, not substantively fair. In the wave of DeFi mining, many so-called “fair start” projects, especially liquidity mining projects, have actually become the playground of the “big whales”, and the concentration of token allocation is even greater than that of VC financing. The “fair start” type of financing is suitable for DeFi projects that do not require a lot of upfront investment, so it is mostly seen in fork projects or protocol portfolio projects; these projects often operate through community-based operations in the early stage, which is a good attempt to democratize financing.

Glossary 3: Value Capture

Value capture in business refers to capturing value from the act of trading. For example, most Internet companies capture the value of the traffic brought by users’ daily use through data, which can be converted into their own cash flow revenue. For DeFi, most service providers, which actually work on top of asset storage protocols and public data bookkeeping, are a very thin application layer, and most DeFi is more precisely a protocol layer than an application. This has led to discussions about how DeFi protocols capture value from transactions becoming an important factor in whether or not they can complete the business closure loop, and is the focus of much attention. There are a lot of attempts to prevent copying, capture value, face competition, and close the business loop, which is the long-term problem DeFi will face as a protocol layer.

Vocabulary 4: rebase

The DeFi space has a class of tokens with an elastic supply mechanism, where each token holder’s wallet balance and total tokens change in equal proportion to the price of the token. rebase is a term used to refer to the process of elastic adjustment of the supply of such tokens, which “resets” the supply of tokens just as the Chinese text suggests. “The term rebase is used to refer to the process of adjusting the elasticity of the supply of such tokens. The concept was first introduced by Ampleforth, for example, every 24 hours, when the average price of a transaction is above $1.06, a rebase will cause an equal proportional inflation of all users’ wallet balances and the total amount of tokens. Conversely, a rebase causes deflation when the average price is below $0.96, while a rebase does not affect token supply when the average price is somewhere in between. It is worth noting that this type of token mechanism has been subsequently copied by many new coins, and the formula, periodicity and mechanism for adjusting token supply by rebase operations varies slightly from project to project.

Glossary 5: APY

Annual Percentage Yield (APY), a time-based measure of an asset’s return on investment (ROI). For example, $100 invested at an annual rate of return of 2% will yield $102 after one year, and the $100 will not have any compound interest during the year.

Vocabulary 6: DApp (Decentralized Application)

DApp means decentralized application and is the basis of all DeFi. Like a DAO, a DApp is essentially an application that also runs itself, without a manager or middleman, allowing users to transfer money between programs.

Vocabulary 7: Approve

This word is often seen by users who have operated Uniswap, and Approve is a feature of ERC20 Token that allows another account, either a personal account or a smart contract account, to use some of your assets. So please make sure the reliability of the other party before approving.

Vocabulary 8: Liquidation / Liquidation

Liquidation means that when the value of your collateral falls close to the debt or even cannot support the debt, the Defi agreement will allow someone else to buy your collateral.

Vocabulary 9: Pump and Dump (raise the price, sell on the high side)

The term “pump and dump” refers to a simultaneous entry of a virtual currency or token by a purchaser who speculates on its price and then immediately dumps it all, causing the price to plummet.

Glossary 10: SushiSwap

Sushi, in the DeFi space, generally refers to SushiSwap or its platform token SUSHI, which has received a lot of attention from DeFi investors due to SushiSwap’s innovative reward mechanism and the dramatic direction of the SUSHI community. AMM). The transaction fee is 0.3% like Uniswap, but the additional difference is that 0.25% is allocated to the liquidity provider (LP), while the remaining 0.05% is allocated to SUSHI token holders by SushiSwap buying back SUSHI.

Glossary 11: Binance Smart Chain (BSC)

The main network of BSC has been launched. As a parallel running chain of BSC, BSC can realize functions such as smart contract creation and BNB pledge mining. The difference with Coin On Chain is that BSC has smart contract function and is compatible with the Ether Virtual Machine (EVM). The design goal here is to maintain the high throughput of the full Coinan chain while introducing smart contracts into its ecosystem.

Glossary 12: PancakeSwap

PancakeSwap uses an automated market maker (“AMM”) mechanism that allows for exchanges on the Binance smartchain. Fast, low cost and allowing anyone to participate, PancakeSwap aims to be the number one liquidity provider on the Binance smartchain and home to innovative gamified farming mechanisms, driving the integration of its mechanisms into other chains and other domains.

Glossary 13: Venus

Venus (XVS) is a lending and stablecoin issuance platform based on the Cryptocurrency Smartchain (BSC) Venus aims to create a decentralized financial (DeFi) lending marketplace on the Cryptocurrency Smartchain and allows for the issuance of synthetic stablecoin assets through a series of BEP-20 collateralized assets. XVS is the platform’s native BEP-20 governance token and is primarily used to participate in platform governance, such as voting on product upgrades, adding new collateral types, adjusting platform parameters, etc.

Glossary 14: AutoFarm

Auto is a revenue mining aggregator on the Cryptocurrency Smartchain, which aims to help users optimize their mining revenue in various dApps in DeFi. The project has the following main components: AutoFarm Vaults: AutoFarm Vaults is a mining revenue optimization platform dedicated to providing DeFi users with automatically compounded mining revenue at theoretically optimal intervals while reducing the cost of fees through smart contracts and revenue optimization strategies. AutoSwap: AutoSwap is a DEX aggregator that provides users with the best prices on DEX trades. AutoSwap splits and channels trades to multiple DEXs to ensure the best prices and lowest slippage.

Glossary 15: Tokens

Tokens (also known as tokens) are often confused with cryptocurrencies such as bitcoin and ethereum. The most common tokens are ERC-20 tokens, which run on the ethereum blockchain and are the bulk of what makes up DeFi.

Glossary 16: Gas fees (miner’s fees)

Miner’s fees are the fees incurred by Ethernet “miners” when processing transactions on the blockchain (which can also be understood as transaction fees in the blockchain network). The miner’s fee is paid by ETH in the wallet of the main chain of Ether, and the miner’s fee is paid by BNB in the wallet of the main chain of BSC.

Vocabulary 17: Collateral (Collateral)

On many DeFi platforms, users can pledge in one cryptocurrency or token in order to borrow another cryptocurrency or token, such as borrowing DAI using Ether (ETH).

Glossary 18: DApp (Decentralized Application)

DApp refers to decentralized applications and is the basis of all DeFi. Like a DApp, a dApp is essentially an application that also runs itself, without a manager or middleman, allowing users to transfer funds between programs.

Glossary 19: Ethereum (Ether)

Ether is perhaps the most important blockchain after Bitcoin at the moment, and the “birthplace” of DeFi. It serves as the project repository for most of the dApps in the DeFi world, structuring the underlying foundation that makes everything possible today.

Vocabulary 20: Smart contract

A smart contract is a computer protocol designed to disseminate, validate or enforce contracts in an informational way. Smart contracts allow trusted transactions to be made without a third party, and these transactions are traceable and irreversible. We have mentioned smart contracts many times, because without them there would be no DeFi, and the importance cannot be overstated.

Posted by:CoinYuppie,Reprinted with attribution to:
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.

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