|Term | Explanation | |-----|----------| | DYOR | Do Your Own Research. Most of the time people say this as a disclaimer following a bearish or bullish stance on a coin, project, investment etc. | | Wallet | The name we use for the software that stores your keys, allowing you to send and receive transactions. | | Keys | Always come in pairs: a public key (which is the same as your address on the network) and a private key (which is a secret, just for you). The keys are linked by what we call "cryptography" | | ETH | Ethereum. Most cryptocurrencies, and many tokens on the Ethereum network use three letter tickers: a hang over from stocks. | | DAI | The name of a stablecoin which is "stable" relative to USD | | Stablecoin | Some token or cryptocurrency which is pegged to a quantity or measure that is independent of blockchains. | | DAO | Decentralized Autonomous Organization. We have already defined [[1. What is Decentralized?|what decentralized means]]. The "autonomous" here is political in implication: it does not really refer to "automation". Most importantly, these are organizations which are not controlled or owned by any single group. The best examples are Bitcoin and Ethereum themselves, though they are not often considered as such. The best commonly-accepted example is likely| D MakerDAO or Yearn. | | TVL | Total Value Locked. This refers to the total amount of capital locked in a protocol, usually via staking, yield farms, and the project's treasury | | APY | Annual Pecentage Yield. The real rate of return earned on an investment, taking into account the effect of compounding interest. It's how much money you earn for putting your money into different protocols, which means for taking different kinds of risks. | | LP | Liquidity Pool. A collection of digital assets accumulated to enable trading, generally on a decentralized exchange (DEX). At its most basic: someone creates a token, then adds that token to a LP on Uniswap (or elsewhere) along with a "trading pair" like ETH or DAI. The amount of ETH reletive to the new token determines its initial price and enables it to be traded. There are much more exotic constructions in the world of "yield farming". | | DEX | Decentralized exchange. A set of smart contracts which matches buyers and sellers through various means, most often some kind of Automated Market Maker. | | AMM | An automated market maker, which means smart contracts that play the role of traditional stock exchanges. Rather than having a centralized intermediary controlling a "book" of buy and sell orders, these mechanisms tend to work by applying a deterministic pricing rule based on liquidity in a given trading pair. [This is one of the best articles](https://medium.com/bollinger-investment-group/constant-function-market-makers-defis-zero-to-one-innovation-968f77022159) we know on the topic, its history, and application in DeFi. | | MEV | Miner Extractable Value. "Miners" (or validators in Ethereum 2.0) are the nodes who do what is required create the next block. If you "mine" a block, you get to order the transactions in that block any way you like. Specifically, there is a "mempool" of transactions waiting to be mined: you select however many of them, order them, and "seal" them in your block. This means that, if you see a really valuable trade, you can craft your own transaction which does the same thing and "frontrun" the transaction you're copying, earning the profits yourself. MEV is the total value miners can extract in this way. | | Oracle | Software which collects information about things that happen "off-chain". Oracles report things like the price of ETH in terms of USD so that smart contracts can execute trades at the correct price. | | Flash loan | An uncollateralized loan only possible on blockchains. Essentially, you can borrow assets with no upfront collateral as long as you pay the borrowed assets within the same blockchain transaction. Why do this if you have to pay it back in the same transaction? Often it is used to manipulate how various contracts track prices of trading pairs so as to profit from arbitrage. | | Synthetic | Sometimes also called "synths", this is the term used for tokens that are engineered to simulate other instruments while altering key characteristics, like duration and cash flow. Synthetic positions can allow traders to take a position without laying out the capital to actually buy or sell the asset. | | Long | Taking a "long position" means buying a lot of shares in the hope that the price will go up and you can sell them for more than you bought them in order to realise a profit. | | Short | Going "short" means borrowing shares and then selling them in anticipation of buying them back in in the future. You take a "short position" when you think the price of that token or share will go down, so you can buy it back more cheaply and realise a profit. | | Derivative | Financial contracts, set between two or more parties, that **derive** their value from an underlying asset, group of assets, or benchmark. | | Call | A kind of derivative which is created a contract that gives the option buyer the right to buy an underlying asset at a specified price within a specific time period. You would buy a call option if you thought the price if the underlying asset will increase. | | Put | A contract that gives the option buyer the right, but not the obligation, to sell—or sell short—a specified amount of an underlying security at a predetermined price within a specified time frame. You would buy a put option when you think the price of the underlying is likely to decrease. | | Spread | A spread is the difference between the bid (buy) and ask (sell) price of a particular asset on an exchange. The bid price can be thought of as representing demand, while the ask price represents supply. A large bid-ask spread is a sign of poor liquidity in a market. This applies to exchanges with order books, and is the fundamental difference between this method of exchange, which requires an intermediary, and DEXes | | Slippage | DEXes do not have a "spread" because they work with Liquidity Pools. If I want to trade ETH for DAI, I go to a contract which holds both, offer to sell it the ETH I have in return for DAI. It will do so at its current price, which is set by the ratio of ETH to DAI in the underlying LP. However, if I have enough ETH - or if there is not a lot of liquidity in the contract - the price it sells me DAI at will "slip" as a significant portion of DAI is leaving the contract, thereby adjusting its ratio and increasing the price of the DAI I wish to buy. | | Reflection | This refers to when you hold an asset and receive yield as a percentage of users buying and selling that asset. | | degen | An abbreviation of the word "degenerate". In DeFi, we know what we're doing is risky so we call ourselves degens. | | rugpull | To have the rug pulled out from under one. This refers to putting money into a given protocol without fully understanding the various kinds of risks and then having the developers or creators of that protocol make off with user money by various kinds of maniuplation, from outright lies to changing the protocol via privileged access | | regen | Some of us didn't like the term "degen" because we care about how DeFi gives us the ability to choose what we put our faith in. We're regenerative builders and thinkers and hackers and traders, hence "regen". | gm | Good Morning - the colloquial greeting often used in DeFi. Further cultural context is [here](https://twitter.com/punk6529/status/1445468399656595456) | | gn | Good Night. | | frens | "Friends". We're so degen we can't even spell good. | Author: Danny Gattas, Ola, and cryptowander