A smart-contract pool that quotes prices algorithmically using a formula (e.g. x·y=k) rather than an order book. Liquidity providers deposit tokens; traders swap against the pool 24/7 and pay fees that accrue to LPs.

An account that deposits token pairs into an AMM pool in exchange for a share of trading fees. LPs take on divergence loss (IL) in exchange for fee income.

A locked-collateral vault that lets you mint debt against it, used in protocols like MakerDAO. If the collateral ratio falls below the liquidation threshold the position is force-closed with a penalty.

Uncollateralized credit of any size, valid for exactly one transaction. If principal + fee aren't repaid before the transaction ends, the entire transaction reverts — credit risk replaced by atomicity.

The fraction of a lending pool's supply that is currently borrowed: U = borrows / (cash + borrows − reserves). Utilization drives interest rates in protocols like Compound and Aave.

Compound's interest-bearing receipt token. The cToken/underlying exchange rate only ever increases as interest accrues — hold cUSDC and your underlying USDC balance grows every block.

Aave's rebasing receipt token, pegged 1:1 to the deposited asset. Balance increases directly in your wallet via a liquidity index — no exchange rate math needed.

A token mechanism that adjusts every holder's balance proportionally each epoch instead of changing the price per token. OHM's staking rebase grows supply; aTokens rebase upward as interest accrues.

LP positions held permanently in the protocol treasury rather than rented from yield-chasing LPs. Pioneered by OlympusDAO: the protocol bonds LP tokens for discounted OHM, owning liquidity that can never be withdrawn.

Pendle's zero-coupon token: redeems 1:1 for the underlying at maturity. Trades below par; the discount is the implied fixed yield. Duration = time to maturity.

Pendle's yield-claim token: receives all floating yield on the underlying until maturity, then expires worthless. Buying YT is a leveraged long on the yield rate itself.

Uniswap v3's discrete price unit: price at tick i = 1.0001^i. LP positions are defined between two ticks; the pool uses virtual reserves within each tick range for capital efficiency.

An LP mechanism that lets providers specify a price range rather than supplying across the full 0–∞ curve. Capital deployed in a narrow range earns fees only when price is inside it, but does so at far higher efficiency.

The public pending-transaction queue nodes maintain before transactions are included in a block. All pending swap data — size, slippage tolerance, target pool — is visible here to searchers.

An MEV extraction pattern: a bot inserts a buy before and a sell after a victim's swap in the same block, pushing price to the victim's slippage limit and then unwinding for profit. Profit ≈ victim's slippage tolerance minus fees and gas.

Value extracted by controlling transaction ordering within a block — sandwiches, liquidations, arbitrage, and JIT liquidity. MEV flows from searchers who find opportunities, to builders who assemble blocks, to validators who sell ordering rights.

A price oracle that averages the spot price over a time window using cumulative accumulators. Expensive to manipulate because a sustained deviation across many blocks is required.

An on-chain data feed that protocols use for asset prices. Compromised or stale oracles are the single largest historical attack surface in DeFi — price manipulation drives liquidations and unbacked minting.

The force-closure of an undercollateralized position: a keeper repays some debt and receives collateral at a discount (the liquidation bonus). Ensures lending protocols remain solvent when collateral values fall.

Aave's portfolio-level solvency ratio: HF = Σ(collateral × liquidation threshold) / Σ debt. Falls below 1 → position is liquidatable. Analogous to a margin maintenance ratio.

A token designed to maintain a stable value, usually pegged to USD. Types: custodial (USDC), CDP-backed (DAI), algorithmic (UST). The peg mechanism determines the tail risk.

A protocol launch strategy that offers superior rewards to holders of a competitor's LP tokens, then atomically migrates the liquidity. SushiSwap drained ~$1B from Uniswap in two weeks via this technique.

A governance model where tokens are locked for a chosen duration in exchange for voting power and protocol fee rights. Longer locks → more ve-tokens. Aligns holders with long-run protocol health by making short-term selling costly.

Re-using collateral that has already been pledged elsewhere — depositing collateral into a lending protocol and then borrowing against it again, creating leveraged exposure. On-chain rehypothecation is transparent but compounds liquidation risk.

The theoretically correct measure of LP cost: the P&L an LP would earn by continuously rebalancing a portfolio at the true price, minus what the AMM actually delivers. LVR separates the hedgeable inventory drift from the unhedgeable loss to informed arbitrageurs.

The difference between expected and executed price on a swap, caused by price impact and (for pending txs) price movement before inclusion. High slippage tolerance is the attacker's budget in a sandwich.

The shortfall vs. simply holding both assets that an LP incurs when token prices diverge from entry. IL(P) = 2√P/(1+P) − 1 where P = current/entry price ratio. 'Impermanent' only if price returns to entry.

The utilization breakpoint in Compound's (and Aave's) interest rate model. Below the kink rates rise gently; above it they spike steeply, defending against 100% utilization that would trap lenders.

OlympusDAO's mechanism for acquiring protocol-owned liquidity: users sell LP tokens or reserve assets to the treasury for discounted OHM vesting over ~5 days. Converts rented liquidity into permanent treasury assets.

The fixed return priced into a Pendle PT at current market price: r = (1/P_PT)^(1/t) − 1. The market's consensus on what the underlying floating yield will average out to over the remaining term.

A bot operator in the MEV supply chain that monitors the mempool (or private order flow) for profitable opportunities, constructs transaction bundles, and bids for block inclusion via tips to builders.

An entity in the post-Flashbots supply chain that assembles optimally-ordered blocks from searcher bundles and pending txs, then auctions the block to validators (proposers) via MEV-Boost.

An Ethereum consensus participant that proposes and attests blocks. Post-Merge, validators sell their block-proposal slot to the highest-bidding builder via MEV-Boost, earning the MEV embedded in the block.

A bundle submission endpoint (e.g. Flashbots) that routes transactions directly to builders without broadcasting to the public mempool. Failed bundles cost nothing; successful ones are front-run-proof until inclusion.

A set of transactions submitted atomically by a searcher: either all execute in the specified order in the same block, or none do. The atomic ordering guarantee is what makes MEV strategies reliable.

A service providing cross-asset margining, securities lending, and rehypothecation — replicated on-chain by protocols like Euler and Fluid, where collateral tiers and sub-accounts enable netting across positions.

A bond that pays no coupons and is issued below par, returning par at maturity. The discount is the yield. Pendle PT tokens are the on-chain equivalent — price gravitates to 1.0 as maturity approaches.

A contract exchanging fixed cash flows for floating ones (or vice versa) on a notional principal. Pendle YT is the receive-floating leg: pay fixed (YT price) up front, receive the floating yield stream until maturity.

A bond's price sensitivity to interest rate changes — for a zero-coupon bond, duration equals time to maturity. A Pendle PT with 1 year to maturity moves ~1% in price for every 1% shift in implied yield.

A plot of implied yields across different maturities for the same underlying asset. Pendle's AMM markets for each (asset, maturity) pair collectively form an on-chain DeFi yield curve — the first true on-chain term structure.

The maximum loan-to-value ratio Compound allows per asset: a 0.75 factor means you can borrow up to 75¢ of debt per $1 of that collateral. Riskier assets get lower factors.

The maximum fraction of collateral value you may borrow against. ETH at 80% LTV means $80 borrowable per $100 supplied; riskier assets get lower LTV.

The collateralization level at which a position becomes liquidatable — set slightly above LTV. The gap between LTV and the threshold is the borrower's safety margin.

The maximum share of a borrower's debt a single liquidation may repay. Aave v3 allows up to 100% when the health factor is below 0.95, otherwise a partial cap.

The discount a liquidator receives on seized collateral — their profit and the borrower's penalty. The bounty that makes keepers compete to keep pools solvent.

Curve's StableSwap dial (A): high values keep the curve flat (near-zero slippage) across a wide band around peg, falling back to constant-product as the pool skews.

A periodic payment between perpetual-futures longs and shorts that tethers the perp's mark price to spot. Mark above index → longs pay shorts, and vice versa.

A futures contract with no expiry, kept aligned to spot by the funding rate. The highest-volume instrument in crypto.

The price a perpetual contract trades at on the venue, as opposed to the index (real spot). Funding closes the gap between mark and index.

The total notional value of derivative contracts currently open. Concentrated open interest near an option strike can 'pin' price to it into expiry.

A liquid receipt for staked ETH (stETH, rETH) that keeps earning staking rewards while remaining usable across DeFi as collateral or liquidity.

A liquid token wrapping a restaked position: ETH staked, restaked via EigenLayer to secure AVSs, and returned as one composable, yield-stacking asset.

Re-pledging already-staked ETH to secure additional protocols (AVSs) for extra yield — rehypothecated trust, with stacked slashing risk. Pioneered by EigenLayer.

An Actively Validated Service: a protocol (bridge, oracle, DA layer) that rents Ethereum's economic security from restakers instead of bootstrapping its own validator set.

The protocol-enforced confiscation of part of a validator's (or restaker's) stake as a penalty for misbehavior. Restaking stacks slashing conditions across every AVS opted into.

When a token meant to track a reference (usually $1) trades away from it. Caused by reserve doubts, collateral crashes, or liquidity flight; for algo-stables it can be terminal.

A signed statement of a desired outcome (e.g. 'swap X for ≥ Y') rather than an explicit transaction path. Solvers compete to fill it with best execution, often netting trades peer-to-peer.

Government-issued money with no intrinsic value, accepted because the state declares it legal tender and everyone agrees to use it. The dollar is fiat; money as shared belief.

Price per unit times units outstanding — the market's total price tag for a company (shares) or token (circulating supply).

A discretionary cash payout of company profits to shareholders. Not guaranteed; the TradFi cousin of crypto 'yield', though yield usually comes from fees or emissions, not profit.

A live, sorted list of all buy orders (bids) and sell orders (asks) on an exchange. A matching engine pairs them on price-time priority; the last match is 'the price'.

The gap between the best bid and best ask — the cost of trading instantly, and a market maker's compensation for quoting both sides.

The secret that authorizes spending from a blockchain address. Whoever holds it controls the funds; lose it and they're gone forever — no reset, no recovery.

12–24 words that encode a wallet's private keys in human-readable form. Anyone with the words has the funds — store it offline, never type it into a website.

Holding your own private keys rather than trusting an exchange to hold them. Maximum sovereignty and maximum responsibility: 'not your keys, not your coins'.

The fungible-token standard on Ethereum: a shared interface (balanceOf, transfer, approve) that lets any wallet or protocol handle any token without custom code — the basis of composability.

The fee paid in a chain's native coin to get a transaction included. It floats with network demand; account abstraction lets it be sponsored or paid in other tokens.

The mechanism by which a blockchain's nodes agree on the next valid block — Proof of Work (energy) or Proof of Stake (locked collateral). It's what makes the ledger trustless.

An off-chain asset (Treasuries, private credit, gold) tokenized on chain. Brings real, non-reflexive yield into DeFi — at the cost of re-introducing issuer and custodian trust.

Decentralized Autonomous Organization: a protocol governed by token-weighted on-chain votes. The shareholder meeting rebuilt as code, with proposals, quorums, and timelocks.

Making a wallet a programmable smart contract — social recovery, spending limits, gas paid in any token, batched actions. ERC-4337 and EIP-7702 deliver it.

A contract that sponsors transaction gas under account abstraction, so a dapp can cover your fees or let you pay them in USDC instead of ETH.

A lending design built from many minimal, isolated markets (Morpho Blue, Euler v2) where bad debt can't cross markets — versus a monolithic shared pool. Curation layers re-aggregate liquidity.

The process by which trading reveals an asset's price. There is no stored price — it's wherever the next trade clears, which depends on the liquidity sitting near the current level.