APR
Annual Percentage Rate. A simple rate without compounding. APY typically exceeds APR when interest compounds.
Related: APY
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Understanding the terminology is the first step toward managing risk with confidence.
Basics
APY
Annual Percentage Yield. The yearly rate of return including compound interest. More frequent compounding increases the effective yield.
Related: TVL, Yield Farming
Collateral
Assets pledged to secure loans or mint stablecoins. Declining collateral increases liquidation risk.
Related: Liquidation, LTV
Liquidity
How easily an asset can be traded without affecting its price. Higher liquidity reduces slippage.
Related: TVL, Slippage
Peg
Mechanism keeping a stablecoin's value anchored. De-pegging can create sharp losses.
Related: Stablecoin
Stablecoin
Token designed to maintain a stable price, often pegged to USD.
Related: Peg, Collateral
Operations
Bridge
Infrastructure for moving assets across chains. Bridges expand liquidity but attract exploits.
Related: TVL, Risk
Staking
Locking tokens to secure a network in exchange for rewards. Common on Proof-of-Stake chains.
Related: Rewards, Validator
Validator
A node that produces and verifies blocks. Validators earn rewards but can be slashed for downtime or misconduct.
Related: Staking, Slashing
Yield Farming
Moving funds between protocols to maximize returns. Managing incentive tokens and exit timing is crucial.
Related: APY, Impermanent Loss
Governance
DAO
Decentralized Autonomous Organization governed by token holders.
Related: Governance Token
Governance Token
Token granting voting power and influence over protocol decisions.
Related: DAO
Smart Contract Audit
External security review of smart contracts. Audits reduce but do not eliminate risk.
Related: Security, Risk
Whitelist
Allowlist of addresses with special access. Common during guarded launches.
Related: Governance, Security
Analytics
Health Factor
Indicator of a collateral position's safety. Values below 1 trigger liquidation.
Related: Liquidation, Collateral
Risk Score
Aggregate view of protocol risk considering audits, token distribution, and incidents.
Related: Security Score, Smart Contract Audit
Security Score
Composite safety indicator based on audits, incident history, and governance.
Related: Smart Contract Audit, TVL
TVL
Total Value Locked. The total value of assets deposited in a protocol. High TVL generally signals deeper liquidity and user trust.
Related: Liquidity, Protocol
Risk
Impermanent Loss
Temporary loss incurred by liquidity providers when token prices diverge. Losses can become permanent if positions close at unfavorable ratios.
Related: Liquidity, Yield Farming
Liquidation
Forced closure of a position when collateral value falls below required thresholds.
Related: Collateral, Health Factor
Rehypothecation
Reuse of collateral by a protocol to generate additional yield. Boosts returns but raises liquidity risk.
Related: Collateral, Risk
Slashing
Penalties that confiscate staked assets due to validator faults. Designed to prevent attacks.
Related: Validator, Staking
Slippage
The difference between expected and executed price. Caused by low liquidity or rapid price changes.
Related: Liquidity