Glossary

CEX

Short for centralized exchange such as Coinbase, Binance, Huobi etc.

DEX

Short for decentralized exchange such as Pancakeswap.

Compound interest

When you deposit an interest-generating asset in a DeFi platform, rewards are sometimes reinvested into your original stake. This, in turn, increases (or compounds) your yield. Therefore, compound interest allows you to see greater and greater gains by simple reinvestment.

Contract address

Decentralized exchanges like Pancakeswap are managed by liquidity providers rather than centralized hosts (order books). This allows anyone to create and deposit tokens to make them available for trading. In turn, scammers often create imitation tokens that resemble more popular assets.

BEP-20

BSC-standard cryptocurrency assets are built and issued using the BEP-20 protocol. Any cryptocurrency token issued on Binance Smart Chain is an BEP-20 by design.

Gas (BSC gas fees)

BSC gas fees are the transaction fees paid to network miners who validate and confirm transactions in the background. Gas fees accompany every transaction interacting with smart contracts, such as when depositing, withdrawing, or transferring assets between decentralized exchanges, wallets, and DeFi pools. Binance Smart Chain (BSC) gas fees are paid in BNB and your wallet always needs to contain a bit of BNB for paying gas fees.

Impermanent loss

When providing liquidity to DeFi AMMs, impermanent loss refers to the loss of your deposited assets during price swings. Since AMMs like Pancakeswap don't use order books, prices are maintained by the ratios between assets inside liquidity pools. Therefore, if you deposit two assets and the price of one or both changes, you might withdraw less of your assets than deposited. However, trading fees garnered from the LP often more than make up for impermanent losses.

Liquidity provider

DeFi participants who deposit their tokens into liquidity pools such as Pancakeswap are known as liquidity providers.

LP token

When a liquidity provider deposits tokens into a liquidity pool, their stake is represented by a minted LP token. The LP token represents the staked asset(s) and can yield farm other DeFi platforms or exchanged back for the original assets.

Slippage

Slippage refers to the gap in price that exists between what you're willing to pay for an asset and the seller's best price. Slippage typically ranges anywhere between 0.5%-2%, but in extreme cases can go as high as 3% or more for particularly illiquid tokens.

Smart Contract

A blockchain-based, lightweight, programmable structure of code that executes functions as determined by the author. In practice, smart contracts run like autonomous programs that replace intermediaries and guarantee outcomes.

Stablecoin

Tokens with value backed by underlying assets or pegged to the value of another asset. Dollar-pegged stablecoins such as USDT, USDC, and BUSD are endowed 1:1 with real dollar reserves, while other stablecoins use rebasing to arrive at a stable valuation.

Staking

Depositing cryptocurrency assets in a DeFi protocol to generate a yield (measured in APY) is known as staking.

Tokenomics

Short for token economics, tokenomics refers to token design and includes factors such as circulating/max token supply, token emission rates, and vesting schedules.

TVL

Total value locked (TVL) refers to the total amount of value deposited (or staked) in a given DeFi platform. Higher TVL means greater liquidity and confidence in a DeFi exchange. Examples of high TVL DeFi protocols include Uniswap, Curve Finance, Aave, and Compound Finance.

Yield

Yield is the amount earned by depositing, or staking, an asset in a DeFi platform such as Yearn Finance, Compound, Aave, Curve Finance, or Synthetix.

Yield farming

​Yield farming is the act of depositing, or staking, tokens, across DeFi platforms offering rewards for liquidity providers. Farming your tokens enables you to generate additional value from your assets by having them work for you.