DeFi — Crypto Glossary
Decentralized finance rebuilt the pieces of a bank — lending, swapping, earning yield — as permissionless smart-contract protocols running on public blockchains. These terms explain the primitives (AMMs, liquidity pools, flash loans) and the specific risks (impermanent loss, depegs, oracle manipulation) that don't exist in traditional finance.
AMM An automated market maker (AMM) is a DEX that prices trades against a pool of assets using a deterministic formula, rather than matching buyers and sellers v… APY APY (annual percentage yield) is the return on an investment over a year, accounting for compounding. Bridge A bridge is a protocol that moves assets or messages between two blockchains. CEX A CEX (centralized exchange) is a company-operated crypto trading venue that takes custody of users' funds. Collateral Collateral is an asset posted to back a loan or derivative position. DEX A DEX (decentralized exchange) is a smart-contract-based venue where users trade assets without handing custody to a company. Flash Loan A flash loan is an uncollateralized DeFi loan that must be borrowed and repaid within a single transaction. Impermanent Loss Impermanent loss is the opportunity cost an LP incurs when the price ratio of the pool's tokens changes. Lending Protocol A lending protocol is a DeFi application where users deposit crypto to earn interest from borrowers. Liquid Staking Liquid staking is a DeFi primitive where users deposit a stakeable asset (ETH, SOL, ATOM) into a pool and receive a liquid token (stETH, mSOL, stATOM) that a… Liquidity Pool A liquidity pool is a smart-contract-held reserve of two (or more) tokens that traders swap against. LTV LTV (loan-to-value) is the ratio of a loan's outstanding balance to the market value of the collateral backing it. Real World Assets Real-world assets (RWAs) are off-chain assets — US Treasuries, private credit, real estate, commodities, invoices — tokenized on public blockchains so they c… Rebase Token A rebase token automatically adjusts every holder's balance — not the price — to maintain a target. Restaking Restaking is the practice of using staked ETH (or a liquid staking token derived from it) to secure additional protocols beyond Ethereum itself. Stablecoin A stablecoin is a crypto asset designed to maintain a stable value relative to a reference asset — usually the US dollar. Swap A swap is the direct exchange of one token for another on a DEX. TVL TVL (total value locked) is the dollar value of all assets held inside a DeFi protocol's smart contracts. Wrapped Token A wrapped token is an ERC-20 (or equivalent) representation of another asset — either a non-native crypto asset brought onto a different chain, or a native a… Yield Farming Yield farming is the practice of moving capital between DeFi protocols to earn the highest available yield — usually a combination of trading fees, lending i…