The Complete Glossary of DeFi Terms
A running reference of the jargon you'll run into across decentralized finance.
AMM (Automated Market Maker): a smart-contract-based exchange that prices trades using a formula and a pool of assets rather than an order book.
TVL (Total Value Locked): the total dollar value of assets deposited into a protocol's smart contracts. A rough measure of usage, but easily distorted by token price moves.
Liquidity Provider: a user who deposits assets into an AMM pool and earns a share of the trading fees generated by that pool, in exchange for taking on price-exposure risk.
Slippage: the difference between the expected price of a trade and the price actually executed. Larger trades in shallow pools produce more slippage.
Impermanent Loss: the difference between holding two assets outright versus supplying them as liquidity, when their prices diverge. It becomes a realized loss only when liquidity is withdrawn at those diverged prices.
This glossary is a starting reference. New terms appear constantly in DeFi, and definitions shift as designs evolve.