DeFi glossary
Explore decentralized finance through lending, liquidity, exchanges and the risks between them. Start with a definition, then follow its connected words.
Automated market maker
A trading mechanism that prices swaps using mathematical rules and available liquidity rather than matching individual orders.
Borrow rate
The interest rate charged on debt in a lending market.
Collateral
Assets committed to support a borrower's obligations or a leveraged position.
Concentrated liquidity
Liquidity supplied to an AMM within a selected price range.
Constant product
An AMM pricing rule based on the product of two asset reserves, commonly expressed as x times y equals k.
Decentralized exchange
An exchange system where trade execution or settlement occurs through blockchain-based mechanisms.
DeFi
Decentralized finance: financial applications whose operations are substantially implemented through blockchain contracts.
Depeg
A significant departure of an asset's market price from its intended reference value.
Fee tier
A configured swap-fee level associated with a particular pool or trading route.
Fiat-backed stablecoin
A stablecoin whose issuer uses fiat-denominated reserve assets to support its target value.
Flash loan
A loan that must satisfy repayment or approved debt conditions within the same atomic transaction.
Health factor
A protocol-specific indicator of how much a borrowing position's collateral can support its debt.
Impermanent loss
A liquidity position's shortfall relative to holding the originally supplied assets separately, caused by changing relative prices.
Liquid staking
Staking through a system that gives users a transferable token representing their staking position or claim.
Liquid staking token
A token representing a claim connected to assets staked through a liquid-staking protocol.
Liquidation
The forced closing or repayment of a position that no longer satisfies required collateral or margin rules.
Liquidation threshold
The protocol parameter used to determine when collateral no longer sufficiently supports a debt position.
Liquidity mining
A reward program that distributes tokens to participants who supply liquidity or perform qualifying protocol activity.
Liquidity pool
A collection of assets held by contracts to support activities such as swapping or lending.
Liquidity provider
A participant who supplies assets that other users can trade or borrow against.
Loan-to-value
A ratio comparing borrowed value with collateral value, often abbreviated LTV.
LP token
A token representing a provider's claim on assets in a particular liquidity pool.
Oracle
A mechanism that makes external or otherwise unavailable information accessible to blockchain applications.
Overcollateralization
A borrowing arrangement requiring collateral worth more than the debt it supports.
Page 1 of 2
Looking for an earlier definition? Explore the original collection
Concept entries explain ideas. Our separate asset registry identifies coins, tokens and networks by source metadata. Sources & standards