DeFi and Smart Contract Glossary

The vision of an internet built on public blockchains where users own their data, assets, and identity instead of relying on centralized companies.

A shared database duplicated across thousands of computers, where records are grouped into blocks and linked in chronological order.

Digital money secured by cryptography and recorded on a blockchain, allowing people to send value directly without banks.

A digital asset created and managed by a smart contract on an existing blockchain, rather than having its own chain.

A cryptocurrency that is native to its own blockchain and used to pay transaction fees and secure the network.

Any cryptocurrency other than Bitcoin. The term combines 'alternative' and 'coin' and covers a huge range of projects, from established networks like Ethereum to thousands of small...

Software or hardware that stores your private keys and lets you send, receive, and manage crypto assets. A wallet does not actually hold coins; it holds the keys that prove ownersh...

A secret number that proves ownership of a crypto address and authorizes transactions from it. Anyone with the private key controls the funds, so it must never be shared.

A list of 12 or 24 ordinary words that acts as the master backup for a wallet, capable of regenerating all its private keys.

A string of characters derived from your public key that others use to send you crypto, similar to an account number.

Holding your own crypto by controlling the private keys yourself, rather than trusting an exchange or company to hold them for you.

The fee paid to have a transaction processed and included on a blockchain like Ethereum. Gas measures the computational work a transaction requires, and users pay in the network's...

An action recorded directly on the blockchain, such as sending tokens or calling a smart contract. It is validated by the network, permanently stored, and visible to anyone.

A bundle of transactions grouped together and added to the blockchain as a single unit. Each block references the previous one, forming a chain.

A computer running blockchain software that stores a copy of the ledger and helps validate and relay transactions.

The method a blockchain uses to get thousands of independent nodes to agree on which transactions are valid and what the ledger's true state is.

The process in Proof of Work blockchains where computers compete to solve a hard math puzzle for the right to add the next block, earning newly created coins as a reward.

Locking up coins to help secure a Proof of Stake blockchain, earning rewards in return. Validators put their stake at risk, so they lose funds if they act dishonestly.

A consensus mechanism where miners spend computing power solving puzzles to add blocks and secure the network.

A consensus mechanism where validators lock up coins as collateral to earn the right to add blocks. Dishonest behavior gets their stake slashed, aligning incentives with honesty.

A program stored on a blockchain that runs automatically when its conditions are met, without needing an intermediary.

An application whose backend logic runs on smart contracts on a blockchain instead of on a company's private servers.

Financial services like lending, trading, and earning yield built on smart contracts instead of banks. Anyone with a wallet can use DeFi permissionlessly, and the code is public.

Crypto financial services run by companies that hold customer funds and control the platform, such as centralized exchanges and lending desks.

A trading platform that runs entirely on smart contracts, letting users swap tokens directly from their own wallets without a company holding their funds.

A company-run platform where you deposit funds and trade crypto through their servers, with the exchange holding your assets.

Moving crypto between DeFi protocols to earn the highest possible returns from interest, trading fees, and token rewards.

Annual Percentage Yield, the total return earned on a deposit over a year including compounding. In DeFi, APY figures can be very high but often depend on token rewards whose price...

A token designed to hold a steady value, usually pegged to a currency like the US dollar. Stablecoins let people trade and hold value on-chain without volatility.

A service that feeds real-world data, such as asset prices, into a blockchain so smart contracts can react to it. Blockchains cannot fetch external data on their own.

A unique token that represents ownership of a specific item, such as digital art, a collectible, or in-game asset.

Creating a new token or NFT and recording it on the blockchain for the first time. Minting an NFT publishes it on-chain and assigns you as the owner, usually for a fee.

An organization governed by its members through on-chain voting instead of a traditional management hierarchy.

The economic design of a token, covering how it is created, distributed, and used, plus its supply schedule and incentives.

The number of a token's units currently available and trading in the market, excluding locked, reserved, or not-yet-released tokens.

A free distribution of tokens to wallets, often to reward early users or bootstrap a community. Protocols airdrop tokens to people who used them before a token launch.

A base blockchain that settles its own transactions and provides security for everything built on top, such as Ethereum, Bitcoin, or Solana.

A network built on top of a Layer 1 that processes transactions off the main chain to make them faster and cheaper, then posts results back for security.

A common type of Layer 2 that bundles many transactions together, executes them off-chain, and posts a compressed summary to the Layer 1.

A tool that lets you move assets or data between different blockchains, for example bringing tokens from Ethereum to a Layer 2.

The extra profit that block producers or bots can capture by reordering, inserting, or censoring transactions within a block.

A scam where a project's creators suddenly withdraw all the liquidity or funds and disappear, leaving holders with worthless tokens.

A social-engineering attack that tricks you into revealing your seed phrase or signing a malicious transaction, often via fake websites, emails, or support messages.

A record of transactions maintained simultaneously across many computers rather than in one central database. Every participant holds a synchronized copy, so there is no single poi...

Government-issued currency like the US dollar or euro, which has value because a state declares it legal tender rather than being backed by a commodity.

A crypto term for holding an asset long-term through price swings instead of selling during volatility. It originated from a misspelled 'hold' in a 2013 forum post and is now read...

Fear, Uncertainty, and Doubt: negative information or rumors, sometimes exaggerated or false, that scare people into selling. The term is common in crypto communities.

Fear Of Missing Out: the anxiety that drives people to buy an asset because its price is rising fast and they do not want to miss the gains.

An individual or entity holding a very large amount of a cryptocurrency, enough that their trades can move the market.

Unchangeable once created. Blockchain records and deployed smart contract code are immutable, meaning no one can secretly alter past transactions or logic.

A property of open blockchains and dApps where anyone can participate, transact, or build without asking a gatekeeper for approval.

A system where you do not have to trust any single party because the rules are enforced by code and verified by the network.

When a stablecoin loses its intended fixed value, for example a dollar-pegged token trading below one dollar. Depegs can be temporary from market stress or permanent from a failed...

A smart contract that holds token reserves and enables trading without an order book. Prices are determined algorithmically based on the ratio of tokens in the pool.

The pricing invariant x * y = k, where x and y are token reserves and k is a constant. When one token is bought, the other's reserve increases to maintain k.

A smart contract holding paired token reserves that enables trading. Liquidity providers deposit equal value of two tokens and receive LP tokens representing their share.

A user who deposits tokens into a liquidity pool to facilitate trading, earning a share of trading fees in return. LPs take on impermanent loss risk in exchange for fee income.

A token minted to liquidity providers representing their share of a pool. LP tokens can be burned to withdraw the underlying tokens plus accumulated fees.

The difference between holding tokens in a liquidity pool versus holding them in a wallet. When the price ratio of pooled tokens changes, the pool rebalances, and LPs end up with m...

The difference between the expected price of a trade and the actual execution price. In AMMs, larger trades relative to pool size cause more slippage because each unit bought moves...

Time-Weighted Average Price oracle. An on-chain price feed calculated from cumulative price accumulators updated on every trade.

An AMM design (introduced by Uniswap V3) where liquidity providers can allocate capital to specific price ranges instead of across the entire curve.

A feature of Uniswap V2 where tokens are sent to the borrower before payment is verified. The borrower can use the tokens, then either return them or pay with the other token, all...

An exploit where a malicious contract calls back into the vulnerable contract before the first execution is complete, manipulating state that hasn't been updated yet.

An exploit that uses uncollateralized flash loans to temporarily manipulate prices, governance votes, or oracle readings within a single transaction.

Observing a pending transaction in the mempool and submitting a transaction with a higher gas price to execute before it.

A condition that must always be true throughout a contract's execution. In Uniswap V2, the key invariant is x * y >= k after every swap.

Checks-Effects-Interactions pattern. A Solidity best practice where you first validate inputs (Checks), then update state (Effects), then make external calls (Interactions).

Exploiting a price oracle to make the protocol act on incorrect price data. Spot price oracles (single-block readings) are trivially manipulable via flash loans.

A design pattern where one contract (the Factory) creates and registers other contracts (Pairs/Pools). In Uniswap V2, the Factory uses CREATE2 to deploy Pair contracts with determi...

An EVM opcode that deploys contracts to deterministic addresses based on the deployer address, a salt, and the contract bytecode.

A smart contract architecture where users interact with a proxy contract that delegates calls to a separate implementation contract.

An architecture pattern separating immutable, security-critical logic (Core: Pair, Factory) from replaceable user-facing contracts (Periphery: Router).

A token that deducts a fee on every transfer, meaning the recipient receives less than the sender sent. These tokens break pre-calculated swap amounts because the actual tokens arr...

Income generated by a protocol's core operations, distinct from token price appreciation. In Uniswap V2, protocol revenue comes from an optional 0.05% fee (1/6th of the 0.

A schedule that releases tokens to holders over time rather than all at once. Prevents early investors and team members from selling immediately after launch.

A token that grants holders voting rights over protocol decisions. Can cover parameter changes (fee rates, collateral factors), treasury allocation, and upgrade proposals.

The total value of assets deposited in a DeFi protocol's smart contracts. TVL is the most common metric for measuring protocol adoption, but it can be misleading: incentivized liqu...

An EVM gas optimization where multiple state variables are packed into a single 32-byte storage slot. Reading one slot costs 2,100 gas.

A standard that allows token approvals via off-chain signatures instead of on-chain transactions. Users sign a permit message, and anyone can submit it on-chain.

A Solidity 0.8+ block where arithmetic overflow/underflow checks are disabled. Used when overflow is intentional (e.g.

A technique for representing fractional numbers in Solidity (which has no native floating-point). Uniswap V2 uses UQ112.