🚀 DeFi may seem complex with its technical jargon, but once the basics are mastered, everything becomes clearer! Here’s a small glossary to decode the essential terms of **Decentralized Finance**:
1. Smart Contracts
📌 Autonomous programs that run on a blockchain (like Ethereum) **without intermediaries**.
🔹 Example: An automatic loan on Aave, without a bank.
2. AMM (Automated Market Maker)
📌 An algorithm that replaces traditional "order books" (like in stock markets) with **liquidity pools**.
🔹 Example: Uniswap uses this system to enable token/token exchanges without intermediaries.
3. Yield Farming
📌 The act of **lending or staking** your cryptos in a DeFi protocol to earn interest (often in native tokens).
🔹 Example: Providing liquidity on Curve Finance to earn CRV.
4. Liquidity Pool
📌 A reserve of funds locked in a smart contract, allowing exchanges and loans.
🔹 Without these pools, there are no DEX (decentralized exchanges) like SushiSwap!
5. Impermanent Loss
📌 Risk associated with providing liquidity: the value of your tokens can fluctuate compared to simply holding them.
⚠️ A key concept to understand before diving in!
6. TVL (Total Value Locked)
📌 The **total value** of funds deposited in a DeFi protocol. An indicator of trust and adoption.
🔎 When a protocol has a TVL of $1 billion, it means it is serious.
7. Oracle
📌 A tool that **connects the blockchain to the real world** by providing external data (e.g., BTC price).
🔹 Example: Chainlink feeds protocols with reliable data.
💡 Why is it important?
DeFi relies on these concepts. Understanding them is **avoiding the pitfalls** and seizing opportunities.
🔗 And you, which DeFi term gave you the most trouble at the beginning? Share it in the comments! 👇
Do you want more in-depth information on a specific term? Let me know! 🚀
