📚Glossary

APR: Annual percentage rate.

APY: Annual percentage yield is the real rate of return on an investment, taking into account the effect of compound interest.

Depeg: Refers to a situation when a digital currency that is supposed to be pegged to the value of another asset loses its peg and no longer maintains parity (1:1 exchange rate). Depeg can be temporary or permanent.

Early termination: Refers to a position that is terminated or closed before its originally intended or contractual maturity date.

Epoch: In the context of cryptocurrencies and blockchain-based networks, an "epoch" refers to a specific period or time interval within the protocol's operation.

Financial option: A financial option is a contract that gives the holder the right, but not the obligation, to buy (call option) or sell (put option) a specific financial asset at a predetermined price (strike price) within a specified period (expiration date).

Fixed yield (coupon): A fixed yield, often referred to as a coupon, is the periodic interest payment that an issuer of a fixed-income security (such as bonds) promises to pay to the bondholder or investor. Fixed-income securities are debt instruments that pay investors regular interest payments at a predetermined interest rate, typically expressed as an annual percentage of the bond's face value. The notion of fixed yield is here applied to a synthetic product with a digital asset as the underlying.

Impermanent loss (IL): Impermanent loss is a concept in decentralized finance (DeFi) that refers to the temporary loss of funds that liquidity providers may experience when providing assets to a liquidity pool, especially in automated market maker (AMM) decentralized exchanges. IL occurs when the relative price of the two assets in the liquidity pool changes compared to the initial deposit. If the price of one asset appreciates significantly compared to the other, the liquidity provider may experience a temporary loss when they withdraw their funds from the pool.

Leverage: Leverage in finance refers to the use of borrowed capital, such as loans, debt, or digital asset, to increase the potential return on investment (ROI by controlling a larger position or asset).

Liquidity provider: A liquidity provider is an individual or entity that contributes funds to a liquidity pool on a decentralized exchange (DEX) or a lending protocol, enabling other users to trade or borrow assets. Liquidity providers play a crucial role in the DeFi ecosystem by supplying assets to these pools, thereby increasing the liquidity and efficiency of decentralized markets. While providing liquidity can be profitable, it carries risks such as impermanent loss, exposure to potential smart contracts, and market volatility.

Lower band: In the context of liquidity pools in DeFi, the lower band refers to the minimum threshold set from which liquidity is provided to generate trading fees. If the underlying asset trades below this threshold, no trading fees are generated.

LP token share price: The LP token share price, also known as the LP token value or LP token price, represents the current market value of a liquidity provider's share in a decentralized finance (DeFi) liquidity pool. LP tokens, short for Liquidity Provider tokens, are tokens issued to liquidity providers in exchange for depositing assets into a liquidity pool on a decentralized exchange (DEX) or lending protocol in the DeFi ecosystem. The LP token share price is determined by the total value of assets in the liquidity pool and the total supply of LP tokens issued. It represents the value of each LP token in terms of the underlying assets (e.g., ETH and DAI). The LP token share price can fluctuate as users trade or interact with the liquidity pool.

Maturity: refers to the date when a financial instrument or investment reaches the end of its predetermined term or duration. It is an important concept as it states the date at which the user can redeem its deposited assets, namely its principal and rewards, if any.

Off-chain: Off-chain refers to operations and activities outside or off the main blockchain network. It involves handling certain aspects of transactions and data processing through alternative mechanisms, such as private databases or layer-2 scaling solutions. Off-chain solutions are often used to address scalability, privacy, and speed limitations associated with on-chain transactions.

On-chain: On-chain refers to operations and activities that occur directly on or within the blockchain network. It involves recording and executing transactions, running smart contracts, and storing data on the blockchain's distributed ledger. On-chain transactions are publicly verifiable and processed and validated by network nodes through consensus mechanisms (e.g., Proof of Work or Stake).

Over-the-Counter (OTC): Over-the-Counter (OTC) in the context of finance refers to a decentralized market where financial instruments such as stocks, bonds, currencies, commodities, and derivatives are traded directly between parties without the involvement of a centralized exchange. OTC markets provide flexibility and accessibility but often involve higher counterpart risk and may lack transparency compared to exchange-traded markets.

Payoff: In finance, the term "payoff" refers to the financial result or outcome of an investment, trading strategy, or financial contract at a specific point in time or under certain conditions. The payoff represents the profit or loss an investor or trader can expect from a particular financial position.

Principal: In the context of investments, "principal" refers to the initial amount of money that is invested or borrowed, excluding any interest or returns earned or paid on that amount. The principal is the original sum of money that serves as the basis for calculating investment returns, interest, and any potential gains or losses.

Redemption: In the context of digital asset, it refers to the process of selling or cashing out an investment position from a pool or a protocol, for instance.

Restructuration: it refers to the change the parameters for a given position subject to some tradeoff. For example, the maturity can be extended, or the leverage increased.

Rewards: In the context of investments, "rewards" typically refer to the potential benefits or returns that an investor can earn from their investment activities. These rewards can come in various forms, depending on the type of investment and the associated risks. In the context of DeFi, it can refer to receiving a fixed yield revenue (coupon) or receiving protocol tokens.

Slippage: Slippage is a common term used in financial markets, including cryptocurrency and traditional financial markets. It refers to the difference between a trade's expected price and its actual executed price. Slippage can occur in various situations, and it can be both positive and negative, depending on whether the executed price is better or worse than the expected price.

Stablecoin: Stablecoin is a category of cryptocurrencies designed to maintain a stable value by pegging their worth to a reserve of assets or through algorithmic mechanisms. Unlike traditional cryptocurrencies like Bitcoin or Ethereum, which can experience significant price volatility, stablecoins aim to provide a stable store of value and are often used as a medium of exchange or a unit of account within the cryptocurrency ecosystem.

Synthetic product: A synthetic product, in the context of finance and investments, refers to a financial instrument or investment strategy that replicates the performance of another asset, index, or financial instrument without direct ownership of the underlying asset. It is created using a combination of other financial instruments, such as derivatives like options, futures, and swaps, to mimic the returns and characteristics of the target asset or index.

Token: In the context of blockchain technology, a token is a digital representation of an asset, utility, or value that exists on a blockchain. Tokens can serve various purposes within blockchain ecosystems, and their functionality depends on the specific blockchain platform and the smart contracts governing them. Tokens are a fundamental component of decentralized applications (Dapps) and enable a wide range of use cases, from representing cryptocurrencies to facilitating access to digital services.

Uniswap: Uniswap is a decentralized cryptocurrency exchange (DEX) that operates on the Ethereum blockchain. It is known for its automated market maker (AMM) model, which allows users to trade various Ethereum-based tokens directly from their wallets without the need for traditional intermediaries like centralized exchanges.

Upper bound: In the context of the liquidity pool in DeFi, the upper bound refers to the maximum threshold set up to which liquidity is provided to generate trading fees. If the underlying asset trades above this threshold, no trading fees are generated.

USDC: USDC, or USD Coin, is a type of stablecoin in the cryptocurrency space. It is a digital currency whose value is designed to be pegged to and maintain a one-to-one (1:1) exchange rate with the United States dollar (USD). In other words, one USDC is intended to always be worth one US dollar. USDC is often used as a stable and secure means of transferring and storing value within the cryptocurrency ecosystem.

Vault: In decentralized finance (DeFi), a "vault" refers to a specific type of smart contract or protocol designed to optimize the management of users' assets by maximizing yield, minimizing risk, and automating various financial strategies. Vaults are a fundamental component of DeFi platforms and are primarily used for automated yield farming.