Core Concepts
- DeFi (Decentralized Finance)
- Financial services built on blockchain without banks or intermediaries.
- Smart Contract
- Self-executing code on the blockchain that automatically enforces agreement terms.
- dApp (Decentralized Application)
- An application that runs on a blockchain network instead of centralized servers.
- TVL (Total Value Locked)
- The total value of assets deposited in a DeFi protocol. Higher = more trusted/used.
- Gas
- The fee paid to execute transactions on a blockchain network.
- Gwei
- A unit of ETH (0.000000001 ETH) used to measure gas prices.
Wallets & Keys
- Non-Custodial Wallet
- A wallet where you control your private keys (MetaMask, Ledger).
- Custodial Wallet
- A wallet where a third party holds your keys (exchange wallets).
- Seed Phrase / Recovery Phrase
- 12-24 words that can restore your wallet. NEVER share this.
- Private Key
- The secret key that controls access to your crypto. Keep it safe!
- Public Key / Address
- Your wallet's public address - safe to share for receiving crypto.
- Hot Wallet
- A wallet connected to the internet (convenient but less secure).
- Cold Wallet
- A wallet stored offline (more secure for large holdings).
Trading Terms
- DEX (Decentralized Exchange)
- An exchange where you trade directly from your wallet without intermediaries.
- CEX (Centralized Exchange)
- Traditional exchange like Coinbase or Binance that holds your funds.
- AMM (Automated Market Maker)
- Algorithm that enables trading without order books using liquidity pools.
- Slippage
- The difference between expected and actual trade price due to market movement.
- Market Cap
- Total value of a cryptocurrency (price x circulating supply).
- Whale
- Someone holding a large amount of cryptocurrency who can move markets.
Liquidity & Yield
- Liquidity Pool (LP)
- A pool of tokens locked in a smart contract to enable trading.
- Liquidity Provider
- Someone who deposits tokens into a pool and earns fees in return.
- LP Token
- Token received when providing liquidity, representing your share of the pool.
- Impermanent Loss (IL)
- Potential loss when LP token prices diverge from when you deposited.
- APR (Annual Percentage Rate)
- Simple interest rate without compounding.
- APY (Annual Percentage Yield)
- Interest rate including compound interest - always higher than APR.
- Yield Farming
- Earning rewards by providing liquidity or staking in DeFi protocols.
- Staking
- Locking tokens to earn rewards and/or secure a network.
Tokens & Standards
- ERC-20
- The standard for fungible tokens on Ethereum (most DeFi tokens).
- ERC-721
- The standard for non-fungible tokens (NFTs) on Ethereum.
- Wrapped Token
- A token pegged to another asset (e.g., WETH, WBTC).
- Stablecoin
- A token pegged to a stable asset like USD (USDC, USDT, DAI).
- Governance Token
- Token that gives voting rights in a protocol's decisions.
Risk & Security
- Rug Pull
- A scam where developers abandon a project and steal investor funds.
- Flash Loan
- An uncollateralized loan that must be borrowed and repaid in one transaction.
- Oracle
- A service that provides external data to smart contracts.
- Audit
- Professional security review of a protocol's smart contracts.
- DYOR (Do Your Own Research)
- Reminder to research before investing - don't trust blindly!