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An audit is either an internal or independent comprehensive review of a concept, system, process, company, or product. A comprehensive audit includes a thoughtful and in-depth look at the structure, strengths, weaknesses, and vulnerabilities of the thing or process being audited.
Audits may be either informal or formal audits and are meant to be a tool to find and analyze weaknesses, so that issues and problems discovered during an audit may be remediated, mitigated, or corrected.
The term annual percentage rate (APR) represents the annual rate charged for earning or borrowing money. APR is expressed as a percentage that represents the actual yearly cost of funds over the term of a loan or income earned on an investment.
This includes any fees or additional costs associated with the transaction, but it does not take compounding into account.
The annual percentage yield (APY) is the real rate of return earned on a savings deposit or investment taking into account the effect of compounding interest. Unlike simple interest, compounding interest is calculated periodically and the amount is immediately added to the balance.
An Automated Market Maker (AMM) is a decentralized asset trading pool that enables market participants to buy or sell cryptocurrencies. AMMs are non-custodial and permissionless in nature. Most AMMs utilize either a constant product, constant mean, or constant sum market-making formula; however, the most common is a constant product market maker, most notably Uniswap.
Centralized Finance. In terms of cryptocurrency, CeFi is represented by centralized cryptocurrency exchanges, businesses, or organizations with a physical address, and usually with some sort of corporate structure. These CeFi businesses must follow all applicable laws, rules, and regulations in each country, state, or region in which they operate.
A CEX is a Centralized Exchange, with a physical address and a corporate structure. Like other CeFi businesses, a CEX must follow all applicable laws, rules, money transmitter licenses, and regulations in each country, state, or region in which they operate. There are significant overhead costs in running a CEX including Corporate leaders, labor, rent and electricity, office supplies, significant legal expenses, and expensive money transmitter licenses to be able to operate in chosen countries, states, or regions.
The borrowing of a deposit asset or assets to seek further business activities such as Yield Farming. Collateralization can amplify gains or losses, and is thus, considered riskier than not borrowing funds.
The measure of the usability and ability of the product to be used as a building block (or "money lego") in the construction of other products or domains. A protocol that is simple, powerful, and that functions well with other protocols would be considered to have high composability.
Once called the eighth wonder of the world by Einstein, compound interest allows greater interest rates and returns on investments by allowing interest gained to be automatically reinvested back in with the original deposits and accrued interest. This reinvestment period is based on the planned distribution of this interest which may be hourly, weekly, monthly, or an annual interest distribution.
With compound interest, the greatest gains are often seen over a certain period in time, with a notably sharp rise in the value of investments seen at longer periods. In general, the longer a deposit benefits from compound interest, the much greater the overall gains when compared to gains made from simple interest.
A form of digital currency protected by encryption algorithms and represented as a digital coin or token. Cryptocurrency coins are programmed to systems and networks for:
- Ability to make future changes
These digital coins or tokens include a ledger or blockchain record of all transactions that occur on their respective networks.
A dApp is a decentralized Web3 application that normally runs on a blockchain in your web browser. Advantages of dApps are that: they allow for new solutions to problems, they are decentralized and are thus rugged, and they are resistant to outages and censorship.
dApps can provide decentralized software application services - such as the Brave browser - but it can also be used to trace and track goods, and can be used to enable international financial transactions without the delay, costs, and hassle of middlemen and bureaucracy. They can also be a keystone to the functionality of complex decentralized exchanges and crypto financial services.
DeFi, or Decentralized Finance, is at its root a set of Smart Contracts running independently on blockchains such as the Binance Smart Chain network. Smart contracts may or may not interact with other smart contracts and even other blockchains. The goal of DeFi is to enhance the profitability of investors in DeFi through automated smart contracts seeking to maximize yields for invested funds. DeFi is marked by rapid innovative progression and testing of new ideas and concepts.
Decentralized Exchange. A cryptocurrency exchange that is decentralized, without a physical location. It is a peer-2-peer network operating on smart contracts where users buy and sell directly to one another, with only the DEX as a middleman. Without the high overhead and regulatory costs of doing business as a CEX, a DEX does not have to follow the stricter rules and regulations that CEXs must follow, and thus can be leaner, more profitable, and more efficient than a CEX.
A concept where a developer decides to not seek outside investment and also does not hold back a share of the tokens during launch for themselves or others. This is considered to be much fairer to investors as their share of equity or ownership of a coin or token is not diluted by pre-investors or founders/founding teams.
Gas fees are rewards paid to miners to incentivize them to support the network's transactions which become written to the blockchain. On Binance Smart Chain, this gas fee unit amount is expressed in Gwei. Withdrawals or transfers to or from CEXs, DEXs Liquidity Pools, and Wallets all incur a gas fee. The amount of this gas fee will vary in cost depending on supply and demand.
Governance refers to the control and use of a Governance coin, token, and/or project through various measures to grow the ecosystem or product and to maximize gains for governance token holders.
A unit of measurement of gas fees for transactions on the Binance Smart Chain network.
On Automated Market Makers (AMM), lending providers (LPs) contribute assets for liquidity to market participants. These AMM pools utilize a bonding curve, typically built on a constant function market marker formula. Asset prices are constantly changed by the AMM pool in response to trading activities by participants. This is an effort to ensure that LPs can receive the same amount of assets they deposited when they withdrawal.
However, due to the volatility of asset prices and arbitragers, LPs occasionally will not receive the exact amount of assets upon withdrawal. The dollar value of the assets they withdraw would typically be lower than if they had not provided liquidity and just held the assets. This dollar value shortfall is known as impermanent loss. The loss is said to be impermanent because if asset prices return to the level during withdrawal the loss is eliminated.
A Lending Provider is a person or group who provides cryptocurrency capital in exchange for a share of rewards and fees gained by lending out and providing liquidity for various cryptocurrency coins and their respective networks. Loans are provided to traders, investors, exchanges, cryptocurrency networks, DAOs, and CIIs to take advantage of arbitrage opportunities and business opportunities by actors within the CeFi and DeFi space.
A measure of how much available circulating supply there is of an asset or currency, and the activity of that asset or currency in an exchange, economy, or network. A currency with low supply and/or circulation is said to be illiquid.
An energy-efficient form of cryptocurrency mining that supports work and transactions on a blockchain usually without expensive application or hardware-specific equipment required by older forms of cryptocurrency mining.
Rewards are provided to liquidity providers as a means to incentivize liquidity mining providers, in addition to growing and supporting a blockchain's user base.
An LP, or Liquidity Pool, is a pool of deposited funds meant to provide liquidity to a currency, network, or smart contract. Liquidity is considered the lifeblood of any physical or digital currency, exchange, or financial network, so there will be designed rewards or incentives given to those who provide liquidity to LPs.
In the realm of cryptocurrency and DeFi, this refers to investors who deposit an asset to provide liquidity on an exchange and/or network(s) to gain an ROI on their investment. Investors deposit one or more of their digital assets into decentralized Liquidity Pools (LPs) to provide liquid capital to exchanges and smart contracts. Liquidity Providers often provide two or more types of assets, in which Impermanent Loss is sometimes seen.
Implemented via smart contracts, a liquidity token is given to a depositor in exchange for that investors deposits to be used for other purposes such as yield farming. Examples of liquidity tokens include CAKE-BNB LP and FUEL-BNB LP tokens. A liquidity token can be exchanged back.
Market Capitalization. A measure of the total funds invested in a company or project. This market cap of a coin, company, or project can be calculated by multiplying the asset's unit price by the total number of coins.
A feed of data, such as the current market prices of an asset or assets, that provides a high confidence service to users and other services that the source and detail of the oracle's data are timely, accurate, and untampered. Sources of data may be singular or decentralized sources and may be dispersed geographically from one another. All exchanges and markets require accurate and timely information to operate properly at high efficiency.
Return On Investment. The gains or losses on an investment. For example, doubling your investment in an asset would be a 100% gain, or 100% ROI. Losing all of your investment would be a 100% loss, or -100% ROI.
In trade, there is almost always a spread between the price that a buyer will pay and the price that a seller will sell an asset. When an order is made, this difference in price between buyer and seller expectations results in price slippage. This slippage in price is usually 1-3% but can be even more for coins with limited liquidity. This slippage can lead to a final sale price of the asset that is either more or less than the requested transaction amount.
A digital contract that is programmed in a language that is considered Turing complete, meaning that with enough processing power and time, a properly programmed smart contract should be able to use its code base and logical algorithms to perform almost any digital task or process. Binance Smart Chain's programming languages, such as Solidity and Vyper, are Turing complete.
When an order is made on an exchange or market, the disagreement of the difference in price between potential buy and sell offers of an asset is called the spread. A wide spread in price can lead to higher slippage.
In cryptocurrency, it is a digital cryptocurrency equivalent to one dollar USD. In theory, the price of the stablecoin is pegged to the US Dollar, but in practice, there is some variance to nearly all stablecoins except for coins like DAI, which are designed with no volatility.
A stablecoin is an attractive investment to investors because:
- It can be used as a safe harbor or hedge for cryptocurrency funds in times of downward volatility, also known as a bear market, whether this trend in downward volatility is temporary or prolonged in duration.
- It can be used as diversification into the realm of cryptocurrency finance to take advantage of new products in CeFi and DeFi that are unavailable elsewhere, as a safe diversification into crypto that won't lose nor gain significant value to the stablecoin price.
- A coin with a stable price is used for transferring crypto around, as a means to not lose value in the base asset itself as its being moved around or deployed to smart contracts or wallets.
The act of depositing a cryptocurrency coin or token into a project and/or protocol, whether the access to the project is either through CeFi or DeFi methods. Stakers hope to gain interest on their deposits into these yield farming projects, by accruing rewards from the protocols themselves.
A testing network for a new coin, project, or product, or for potential improvements to an existing product or offering. Testnets are used to test the viability and vulnerability of new ideas, concepts, code, and processes prior to moving on to a production network or networks of some sort.
In programming, it refers to a language that is powerful and semi-autonomous, in a way. When a language such as Solidity or Vyper is Turing complete, it means that with enough processing power and time, a properly programmed smart contract using a Turing complete language should be able to use its code base and logical algorithms to perform nearly any digital task or process.
A Turing complete language can even be programmed to have impacts on real-world activities through electronic means, as these rapidly executed digital commands can trigger actions in the real world through sensors, relays, switches, cameras, alarms, and alerts that can trigger a human and/or automatic response.
The concept of a Turing complete programming language was named after the inventor of the idea, Alan Turing. He was an unsung war hero and legendary mathematician. Turing was also a renowned and brilliant computer scientist, cryptanalyst, and forward thinker.
The Total Value Locked into a smart contract or set of smart contracts that may be deployed or stored at one or more exchanges or markets. This is used as a measurement of investor deposits. It is the dollar value of all the coins or tokens locked into a platform, protocol, lending program, yield farming program, or insurance liquidity pool.
In investing, a measure of how rapid changes are seen to the price of an asset or market. Newer early-stage technology companies and projects in the explosive growth stage tend to see very high volatility in the price of their assets in their early days. Should the company or project behind the volatile asset see their venture survive over time, this volatility tends to be much reduced as the company's market cap grows and matures.
A software or hardware cryptocurrency wallet that can hold a variety of coins.
Wallets may also be considered a cold wallet - meant to be used for long term storage of crypto coins for security purposes or a hot wallet, which is considered more at risk than a cold wallet due to its inaccessibility (usually offline). A hot wallet is meant to be used for active or semi-active transactions in and out of that wallet, as well as a place to withdraw or add funds.
The manual or automatic lending and/or arbitrage of digital assets to provide an ROI for lending out or depositing digital assets in CeFi or DeFi. Yield Farming can provide an additional income stream over and above any potential increase in the value of an underlying asset. For several reasons - including the ability to make rapid changes, much lower overhead costs, and no regulatory costs - DeFi tends to provide much higher yields when compared to CeFi options.