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Interpretation of Nouns in DeFi Field
APY
Annual rate of return, a time-based return on asset investment (ROI). For example, if any interest earned on this $100 is not compounded in a year, the $100 invested with 2% of APY will generate $102 in one year. Assuming a static APY rate, in this case, the monthly ROI is 0.16%.
TVL
The total value of smart contracts or a group of smart contracts that are locked in one or more exchanges or markets for deployment and storage. This is used to measure investor deposits. It is the dollar value of all coins or tokens locked in the platform, agreement, loan program, revenue mining plan, or insurance liquidity pool.
Smart Contract
It is a computer agreement designed to spread, verify, or execute a contract in an information-based way. Smart contracts allow trusted transactions without a third party, which are traceable and irreversible. The concept of smart contracts was first proposed by Nick Szabo in 1995. The purpose of smart contracts is to provide a security method superior to traditional contracts and reduce other transaction costs associated with the contract.
Slippage
In transactions, there is almost always a price difference between the price paid by the buyer and the price at which the seller sells the asset. When placing an order, the price difference between buyers and sellers expects that the price will fall. The price drop is usually 1-3%, but it can be even greater for currencies with limited liquidity. This slippage may cause the final selling price of the asset to be higher or lower than the requested transaction amount.
GAS FEE
Gas literally means: gasoline, a kind of fuel. When you send tokens, execute contracts, transfer coins, or do other things on the ether block, the computer needs to perform calculations, and this calculation process requires network resources. You have to pay a "fuel fee" (that is, Gas) to let the computer work for you and let the miners process the transactions for you. Technically speaking, Gas exists in the Ethereum virtual machine as a counting unit of computational workload. Gas fees are fully paid in ETH.
The GAS fee unit is represented by gwei, and any withdrawal or transfer from the wallet will incur GAS fee. The amount of the GAS fee will vary according to supply and demand. According to the current design: when the demand on the Ethereum network becomes higher, the gas fee will also become higher.
Whales
Refers to users who have a lot of cryptocurrency.
Arbitrage
Traders use the price difference between two items to obtain profits by buying low and selling high.
AMM
Automated market maker，it is relative to the market maker model of traditional centralized exchanges. AMM is equivalent to a decentralized market maker model, and everyone can become a liquidity provider. In the AMM model, liquidity providers can obtain fees (handling fees) income, but also face the risk of "irregular losses".
Impermanence loss
Impermanence is the difference in value between holding tokens in AMM and holding tokens in your own wallet. This happens when the token price in AMM deviates in any direction. The greater the deviation, the greater the loss of impermanence.
CEX，DEX
CEX stands for centralized trading platform, such as ‘Huobi’, ‘Binance’, and ‘OKEX’.
DEX stands for decentralized trading platform, such as ‘MoonSwap’ and ‘Uniswap’.
DAO
DAO is called a distributed autonomous organization, which is an organization represented by rules coded as a computer program, which is transparent, controlled by token holders, and is not affected by a central organization. DAO uses blockchain to verify transactions.
Everyone in the DAO can post proposals and vote to make decisions. Cryptocurrency is used to represent the key value, and the vote with the highest amount at the end of the specified period wins. This is in direct contrast to other forms of voting, which usually have the same weight per person. Usually, the proposal is a "yes or no" question, that is, whether the project should be developed.
DeFi
"Decentralized finance", as opposed to traditional centralized finance, refers to applications in various financial fields built on an open decentralized network. The goal is to establish a multi-level financial system with blockchain technology and cryptocurrency. As a foundation, re-create and improve the existing financial system.
Liquidity mining
"Liquid mining" in the DeFi field refers to the use of DeFi products with a mining mechanism to trade, pledge, deposit, and lend designated token assets as required to provide liquidity for the product's fund pool and obtain income process. This benefit may be the native token of the project, or the governance rights it represents.
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