DeFi Glossary

DeFi is gaining serious momentum. As people look for alternatives to the centralised financial world, new tools and services are popping up everyday. However, along with those innovations comes a huge amount of acronyms and expressions that can easily fly right over your head.

If you want some explanations that are written in everyday terms, you’ve come to the right place. Bookmark this page so you can revisit us the next time you’re stumped by terminology.

Altcoin: Any cryptocurrency that is not Bitcoin (the original coin).

Address: A series of numbers and letters that represents the location of a wallet somewhere on the blockchain.

ATH: An asset’s All Time High value

ATL: An asset’s All Time Low value

Bull market: A market that is trending upwards

Bear market: A market that is trending downwards

Blockchain: A decentralised and digital ledger that stores chronological transaction information about cryptocurrencies

CeFi: The opposite of DeFi, CeFi stands for Centralized Finance. This is the traditional system for finances.

Coin: Any cryptocurrency that is not a utility token.

Cryptocurrency: A digital currency or asset that is operating independently of a central bank and is encrypted in order to carefully regulate the generation of the currency and to confirm when funds have been transferred.

DeFi: Decentralized Finance, the reason you have found this simple glossary!

dApps: the little ‘d’ stands for decentralized, and apps is short for Applications. In full, decentralized applications run on a peer-to-peer network of computers, rather than going through a central service, computer, or the cloud.

DEX: Decentralized Exchange. These are peer-to-peer exchanges where crypto-traders make deals directly with one another, bypassing the central authority.

DAC: This stands for Decentralized Autonomous Cooperative and refers to a shareholder run decentralized group.

DAO: This stands for Distributed or Decentralized Autonomous Organisation and it relates to the defined system of rules that a decentralized organisation will follow.

Decryption: The process of reversing encryption so that unreadable data can become readable.

Dump: Selling all or most of a particular cryptocurrency to make quick profits while the value is high.

ETH: The three-letter code for Ethereum, one of the major cryptocurrencies which is also a decentralized and open-source blockchain that allows developers to make dApps and smart contracts. See also: Smart contracts.

Fiat: Fiat money is a government-issued currency that is not backed by a physical commodity such as gold or silver.

FUD: Fear, Uncertainty, Doubt. Malicious information-spreading tactics used to influence crypto-prices by casting doubt on traders and investors.

HODL: ‘Hold On for Dear Life’, or an alternative spelling to ‘hold’. Either way, if you see HODL, it means you should keep your assets. Equally, someone who regularly holds is known as a HODLer. 

ICO: Initial Coin Offering, a form of crowdfunding for new crypto-projects.

Liquidity: The ease with which a cryptocurrency can be bought and sold without influencing the market price.

MCAP: Market capitalization, in other words, the number of coins a cryptocurrency has in circulation multiplied by the current price.

Mining: Using processing power to certify transactions on a blockchain network and earn cryptocurrency as a result.

Node: A place where the blockchain communicates for security reasons.

P2P: Peer-to-peer is a major part of the DeFi world and relates to the connection of two computers who share information or assets without going through a central server.

Pump: The opposite of dump in the cryptocurrency world. This is a strategy used to (often artificially) drive up the price of an asset before a planned dump. Also see: Whales

Shit coin: Pardon the rude word, but shit coin is the common term for a completely worthless cryptocurrency that offers no value on any timeline

Smart contracts: These are automated contracts that take certain actions when prearranged conditions are met. For example, a transaction can be fulfilled when a particular term is met.

Stablecoin: Cryptocurrencies like Tether (USDT) and USDCoin (USDC) are stablecoins, meaning their value is pegged to the US dollar.

Tokens: Slightly different from a cryptocurrency coin, a blockchain issues tokens that can either contain some financial value (represent an asset), be redeemed for certain digital assets, or enable a specific use within their native blockchain.

Trustless: Nobody maintains complete authority over a system, instead, a consensus is successfully achieved between non-trusting participants with a common goal.

Total supply: The total amount of coins of a particular cryptocurrency that are in circulation.

UI: User Interface, which is where the interactions between you, the human, and machines occur. This can be as simple as what you see when using an app, and it defines how users and machines communicate.

Volatility: How frequently does the price of an asset go up and down.

Volume: Often seen on exchanges, this measures the number of units of a cryptocurrency that changed hands during a specified timeframe (usually 24 hours as standard).

Whales: Individuals or organisations that strategically hold large amounts of certain cryptocurrencies so that they can collectively impact the markets (often with pump and dump schemes).

Wallet: This is where you store your cryptocurrency, and it’s also from where you send and receive cryptocurrency. A hard or cold wallet is a hardware device, whereas a hot wallet is an online wallet that is connected to the internet.

Yield Farming: Taking advantage of the DeFi protocols and innovative products to make big profits.

We hope this simplified list of DeFi terms will help you to find your feet in this world. Remember to bookmark this page so that any time you come across a term you’re unsure about, you can come back and double-check.

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