# DeFi Glossary
Aave is an open-source money market platform on the Ethereum blockchain. Users can deposit assets as collateral for borrowing of other assets. This is an interest-bearing protocol that Rari Capital has integrated!
# Address (Wallet)
A digital wallet with address (0x...) allows you to receive transactions on the blockchain. The address is a character string that is used as your "personal identification".
Annual percentage yield represents the rate of return for your interest accrued. Unlike annual percentage rate (APR), APY stresses the idea of compound interest that you are earning in DeFi. To calculate your daily ROI, divide APY by 365 for the daily rate.
Oftentimes in inefficient markets, you have many opportunities to profit off of imbalances. This can happen with asset prices being different depending on the exchange or switching between interest rates.
Security and smart contract risk is the most important aspect of DeFi. All protocols should have their smart contract audited, which allows a third-party service into the codebase to check for potential bugs or vulnerabilities that may have not been noticed by the engineering team.
# Automated Market Maker (AMM)
Market makers play a huge role in DeFi, as they play the roles of ensuring liquidity on both the buyer and seller’s end. An automated market maker is a smart contract that creates liquidity pools of specific ERC20 tokens which are traded algorithmically rather than individual trading. Liquidity providers (LP) earn fees based on their liquidity provisions in creating market efficiency.
# Cold Wallets
This is used for long-term storage of crypto assets. Examples of this include hardware wallets and paper wallets.
Borrowing a digital asset to gain exposure on other assets.
# Compound Finance
Similar to Aave, Compound Finance is a money market protocol that bears interest to its users. Rari Capital has this protocol integrated!
Cryptocurrencies are also known as digital currencies. These are algorithmic based currencies that live on the blockchain and available to send and receive.
Decentralized autonomous organization. Full control of the platform lies in the hands of the governance token holders.
The user interface that interacts with the web3 smart contracts. Decentralized application that enables users to easily use the underlying protocol(s).
Decentralized Finance is a series of Smart Contracts on the blockchain that hosts financial primitives in a non-custodial manner.
Investment figure based off of an underlying value.
Decentralized exchange that puts the power of trading back into the users' hands. DEXes do not require a middleman and use Smart Contracts to process trades between parties.
# Digital Signature
Confirmation of a transaction on the blockchain.
# Distributed Ledger
Shared consensus of data across the blockchain network. There is no central administrator that controls the data and transactions.
Open trading platform for crypto assets. Allows users to lend/borrow assets as well as gain exposure through leveraged trading similar to a normal margin trading account.
Token standard built on top of the Ethereum blockchain.
Non-fungible tokens. Usually in the form of a collectible on the blockchain like art or cards.
Ethereum is the blockchain that Smart Contracts and DeFi run on. The native currency is ETH or ETHER.
Website that allows you to explore and search the Ethereum blockchain for every piece of data you may want (transactions, addresses, tokens, prices, etc).
The native currency behind the Ethereum blockchain. Used to pay gas (transaction fee costs).
Blockchain-based software program that allows developers to interact with the Ethereum network.
Government issued currency.
# Fuse Pools
Rari Capital's own customized lending and borrowing pools.
# Gas Fees
Rewards paid to validators that confirm each transaction on the blockchain. Paid in ETH.
# Governance (and Token)
Token issued by projects used to grow the platform through voting power.
Unit that measures the value of gas fees on the Ethereum blockchain.
# Hot Wallets
Wallets that are used for daily purposes. Examples include: exchanges, mobile wallets, and desktop wallets.
# Impermanent Loss
When providing liquidity to markets that are still not efficient, liquidity providers may not receive their initial equivalent value upon withdraw due to volatility across token prices and arbitragers.
# IOU Token
Token that represents your share in the pool.
# Lending Aggregator
Algorithmic based system that maximizes your yield across lending protocols.
When trading on leverage, you supply the collateral to support your borrowed position. If the price of the asset at hand falls below the price determined by your collateralization ratio, then your position is liquidated. This means that someone bought you out of your position and most likely took a fee depending on the platform.
# Liquidity Providing
Providing liquidity to protocols to create more market efficiency. Liquidity providers are rewarded for their through fees.
The official deployed version of the live blockchain that developers can interact with.
mStable brings together stablecoins with high yield earning strategies.
# Multisig Wallet
One of the most secure wallets you can create. Requires at least two keys to sign off on a transaction.
Computer connected to the blockchain that follows rules and shares information with other computers on the network.
Autonomously searching for the highest ROI.
# Private Key
Lock and key scenario for your wallet. Private key is your secure password that needs to be kept in a safe location and not shared with anyone.
Suite of smart contracts that allow users to interact with the application.
# Public Key
This is your public address that you can share and is used to receive assets.
The process of algorithmically finding the best yield for users through constant adjustments of the allocation.
Products that provide direct access to an underlying protocol.
Algorithmic based system that actively returns the highest net value profit.
Return on Investment.
Relates to the limitations of the blockchain in processing transactions (speed or transactions per block).
# Smart Contract
A smart contract is code on the Ethereum blockchain that controls the exchange of value in a trustless manner.
The coding language that is used to write Smart Contracts.
1:1 USD equivalent in digital form on the blockchain. Some maintain a $1 US peg, while some suffer from volatility like DAI.
# Supply Cap
In reference to our pools, a limit placed on supply to ensure there isn't too much collateral in the pool to effectively liquidate if necessary.
# Transaction Block
Basket of data that flows through the blockchain.
TVL stands for "total value locked" within a protocol; the amount of assets a protocol has.
# TWAP Oracles
Time Weighted Average Price. TWAP oracles are implemented by Uniswap and Sushiswap, and utilized by Rari. As they are a lagging indicator, TWAP oracles tend to balance security over freshness.
# VWAP Oracles
Volume Weighted Average Price. Chainlink price feeds are an example of this.They track prices on all exchanges - CEX and DEX - and weight by real volume.
Suite of DeFi tools using smart contracts to provide financial independence to users.
# 51% Attack
Single entity or organization taking control of the blockchain voting power through their monopoly of mining power.