Defied Glossary
A
Aave
One of the largest open lending protocols, where people supply tokens to pools and others borrow them against collateral.
Account abstraction
Making a wallet work like a programmable account, so it can do things a plain key can't, such as let someone else pay its network fees.
Address poisoning
A scam where someone sends you a tiny payment from an address that looks almost like one you use, hoping you'll copy it by mistake.
Aggregator
A service that checks many exchanges at once and routes your trade through the one, or the mix, with the best rate.
Airdrop
Tokens sent to many wallets for free, often to reward early users of a protocol.
AMM
Automated market maker: a DEX that prices trades with a formula over a pool of tokens, instead of matching buyers and sellers.
APR
Annual percentage rate: the yearly interest rate without counting interest earned on interest.
APY
Annual percentage yield: what a deposit would earn over a year at today's rate, with interest added back as it comes in.
Arbitrage
Buying something where it's cheaper and selling it where it's dearer, at the same moment.
Audit
A review of a smart contract's code by an outside security firm, looking for bugs before and after launch.
B
Bad debt
A loan in a lending market whose collateral is worth less than the debt, so it can't be fully repaid.
Base
A public blockchain built by Coinbase that runs on top of Ethereum, with low fees and fast confirmations.
Bitcoin
The first cryptocurrency, launched in 2009, with a fixed supply of 21 million coins and its own blockchain.
Block explorer
A website that shows everything recorded on a blockchain: every wallet, balance and transaction.
Blockchain
A shared record of who owns what, kept by many computers at once, that no single company can change on its own.
Borrow rate
The variable interest a borrower pays on a loan in a lending market.
Bridge (crosschain)
A service that moves tokens from one blockchain to another.
Bridge.xyz
A regulated payment provider, owned by Stripe, that turns euros into stablecoins and back.
C
CEX
Centralised exchange: a company that runs a trading platform and holds your money while you use it, such as Coinbase or Binance.
Chainlink
The most used oracle network, which supplies prices and other data to smart contracts.
Circle
The US company that issues USDC and EURC.
Collateral
What a borrower deposits to secure a loan, which the protocol can sell if the loan isn't safe any more.
Composability
The way DeFi protocols can plug into each other like building blocks, because they all share one public blockchain.
Compound
One of the first open lending protocols, where people supply tokens to earn a variable rate and others borrow against collateral.
Confirmation
The point where a transaction is included in a block and accepted by the network.
Crypto wallet
The app or device that holds the key to your money on a blockchain and lets you send, receive and sign.
Crypto-asset
The EU's legal term for a digital token recorded on a blockchain, from bitcoin to stablecoins.
Cryptocurrency
Digital money recorded on a blockchain instead of by a bank, which you can hold and send without a company in between.
Curator
The team that runs a lending vault: it picks which markets the vault lends to and sets its risk limits.
Curve
A decentralised exchange built for trading between tokens of similar value, such as two dollar stablecoins.
Custodial wallet
A wallet where a company holds the keys and your money for you, the way an exchange or a bank app does.
D
DAO
Decentralised autonomous organisation: a group that runs a protocol by token holders' votes rather than a company's management.
dApp
Decentralised app: an app whose core runs on smart contracts, used by connecting your wallet.
DeFi
Decentralised finance: lending, borrowing and exchanging that runs on public smart contracts instead of through a bank.
Depeg
When a stablecoin's price drifts away from the currency it tracks, for example a digital dollar trading at 0.97 dollars.
DEX
Decentralised exchange: smart contracts that let you trade tokens straight from your own wallet, with no company holding your money.
Digital euro
A digital form of cash planned by the European Central Bank. It is not the same thing as EURC.
E
Embedded wallet
A wallet created inside an app when you sign in with your email or Google, with no browser extension and no seed phrase to write down.
ERC-20
The standard format for tokens on Ethereum and networks like Base, so any wallet can hold and send them.
ERC-4626
The standard format for vaults on Ethereum and networks like Base.
ETH
Ether, the native currency of Ethereum, also used to pay gas fees on Base.
Ethereum
The public blockchain where smart contracts and most of DeFi began.
EURC
A euro stablecoin issued by Circle: one EURC is meant to be worth one euro, backed by euro reserves.
Exchange (swap)
Trading one token for another, such as EURC for USDC, at a rate set by the market.
Exploit
An attack that uses a bug or design flaw in a smart contract to take money from it.
F
Fiat
Ordinary government money such as the euro or the dollar, as held in a bank account.
Finality
When a transaction can no longer be changed or reversed by anyone.
Flash loan
A loan with no collateral that must be borrowed and repaid within the same transaction.
Fluid
An open protocol that combines lending and a DEX, so the same deposits can earn from loans and from trades.
Fork
A copy of a protocol's code launched as a new project, or a split in a blockchain's rules.
G
H
Hardware wallet
A small device that keeps a wallet's key offline and signs transactions without exposing it.
Health factor
A number that shows how safe a loan is: above 1 it's safe, at 1 or below it can be liquidated.
Hot wallet
A wallet whose key is used on an internet-connected device, such as an app on your phone.
I
IBAN
International Bank Account Number: the account number banks in Europe use to send and receive money.
Impermanent loss
What a liquidity provider gives up when the prices of the tokens in a pool move apart, compared with just holding them.
Interest rate model
The formula a lending market uses to set its rates from how much of the pool is borrowed.
K
L
Layer 1
A main blockchain that records and secures its own transactions, such as Ethereum or Bitcoin.
Layer 2
A network built on top of a main blockchain such as Ethereum that handles transactions faster and for less.
Lending market
An onchain pool where people supply money that others borrow, with the interest paid by borrowers going to those who supplied it.
Liquid staking
Staking a token through a protocol that gives you a tradable token in return, so your stake stays usable.
Liquidation
When a lending protocol sells a borrower's collateral because its value has fallen too close to the loan.
Liquidity
How easily a token can be exchanged or withdrawn without moving its price.
Liquidity pool
Tokens locked in a smart contract that people can trade against or borrow from.
Liquidity provider
Someone who deposits tokens into a pool so others can trade or borrow, in return for a share of the fees.
Loan-to-value (LTV)
How much you can borrow against your collateral, as a share of its value.
M
Mainnet
The live version of a blockchain, where tokens have real value, as opposed to a testnet used for trying things out.
Mempool
The waiting room for transactions that have been sent but not yet added to a block.
MEV
Maximal extractable value: profit that block builders or bots make by reordering, adding or leaving out transactions.
MiCA
Markets in Crypto-Assets: the EU's rulebook for crypto-assets and the companies that issue or handle them, in force since 2024.
Mint and burn
Creating new tokens (mint) or destroying them (burn), which is how a stablecoin's supply follows deposits and redemptions.
Morpho
An open lending network made of separate markets and vaults, each with its own collateral and risk settings.
Multisig
A wallet that needs several keys to approve a transaction, such as two out of three.
N
O
Off-ramp
Turning stablecoins back into money in your bank account.
On-ramp
Turning money from your bank account into stablecoins.
Onchain
Recorded on a public blockchain, where anyone can check it, rather than in one company's private database.
Onchain finance
Saving, paying, exchanging and lending with money held on a public blockchain, in a wallet you control.
Oracle
A service that brings outside data, such as prices, onto a blockchain for smart contracts to use.
Order book
A list of buy and sell offers at different prices, matched against each other, as on a stock exchange.
Overcollateralised
A loan or stablecoin backed by more value than it's worth, to leave room for price swings.
P
Paymaster
A smart contract that pays a transaction's gas fee on someone else's behalf.
Peg
The value a stablecoin is designed to hold, such as one euro for EURC.
Permissionless
Open to anyone, with no account to open and no one who can approve or refuse you.
Phishing
A scam that tricks you into giving away your key or signing a harmful transaction, usually through a fake site or message.
Price impact
How much your own trade moves the price of a pool, which depends on the trade's size against the pool's liquidity.
Private key
The secret that proves a wallet is yours and signs every payment from it. Whoever has it controls the wallet.
Privy
The wallet infrastructure that creates Defied's embedded wallet when you sign in with your email or Google.
Proof of stake
A way for a blockchain to agree on new blocks, where validators lock up tokens as a guarantee of honest behaviour.
Protocol
A set of smart contracts with its own rules that provides a service onchain, such as lending or trading.
Public key
The half of a wallet's key pair that can be shared, from which its address is made.
R
Real-world assets (RWA)
Ordinary assets, such as government bonds or loans, represented as tokens on a blockchain.
Redemption
Handing stablecoins back to the issuer in exchange for the same amount of ordinary money.
Reserves
The cash and short term assets a stablecoin issuer holds to back every token in circulation.
Rollup
A kind of layer 2 that rolls many transactions into one batch and posts it to the main chain.
RPC
The connection an app uses to talk to a blockchain node: to read balances and send transactions.
Rug pull
A scam where a project's creators take the money users deposited and disappear.
S
Seed phrase
Twelve or twenty-four words that back up a wallet's private key. It's also called a recovery phrase.
Self-custody
Holding your money yourself, in a wallet only you control, instead of trusting a bank or exchange to hold it.
SEPA
Single Euro Payments Area: the system for euro bank transfers across the EU and nearby countries.
Sequencer
The operator of a layer 2 that puts transactions in order and bundles them for the main chain.
Signature
Your wallet's approval of a transaction or message, made with your private key.
Slippage
The difference between the rate you see and the rate you get, because the price moved before the trade settled.
Smart contract
A program that lives on a blockchain and runs exactly as written, holding and moving tokens by its own rules.
Smart wallet
A wallet that is itself a smart contract, so it can have rules such as fee sponsorship, batched steps or recovery options.
Spark
A lending protocol from the Sky ecosystem (formerly MakerDAO), with markets for stablecoins and other tokens.
Stablecoin
A token on a blockchain designed to keep a steady value, usually one dollar or one euro, backed by reserves.
Staking
Locking tokens to help secure a proof of stake network, in return for rewards.
Supply rate
The variable interest earned for supplying tokens to a lending market.
T
Testnet
A copy of a blockchain for testing, where tokens have no real value.
Token
A unit of value recorded on a blockchain, which can stand for money, a vote, a share of a pool or anything else.
Token approval
Permission you give a smart contract to move a set amount of one of your tokens, also called an allowance.
Tokenisation
Turning an asset, such as money or a bond, into tokens on a blockchain so it can move like any other token.
Transaction
One action recorded on a blockchain, such as a payment, an exchange or a deposit.
Transaction hash
The unique ID of a transaction, a long string starting with 0x, that you can look up on a block explorer.
Travel rule
EU rules that make crypto service providers pass sender and recipient details along with transfers between them.
TVL
Total value locked: how much money is deposited in a protocol or pool right now.
U
Uniswap
The largest decentralised exchange, an AMM where anyone can trade or provide liquidity.
USDC
A dollar stablecoin issued by Circle: one USDC is meant to be worth one US dollar, backed by dollar reserves.
USDT
Tether's dollar stablecoin, the largest by supply.
Username
A short name that points to a wallet address, so people can pay you without copying 0x addresses.
Utilisation
How much of a lending pool is currently borrowed, as a share of everything supplied.
V
Validator
A computer that checks new transactions and helps add blocks on a proof of stake network.
Variable rate
An interest rate that changes over time, often by the minute, with no fixed or guaranteed return.
Vault
A smart contract that takes deposits and spreads them across lending markets by a set strategy.
Volatility
How much and how fast a price goes up and down.
W
Y
Yield
What money earns over time, from interest, fees or rewards, usually shown as a yearly rate.
Yield aggregator
A protocol that moves deposits between markets automatically to follow the best available rate.
Yield-bearing stablecoin
A stablecoin that passes on earnings from its reserves or strategy to holders.
YO
A protocol whose vaults move deposits between lending markets to follow the best rate.
Z