The mechanism decentralized exchanges (DEXs) use to match trades, replacing the traditional buy/sell <a href="/en/glossary/trading-concepts/order-book/">Order Book</a> with a mathematical formula. The most common version uses the 'constant-product formula x×y=k' to maintain the <a href="https://stablecoin-bible.com/en/glossary/fiat-backed/reserve-ratio/">Reserve Ratio</a> of two tokens, automatically adjusting the price with every trade. Uniswap is the most representative AMM protocol.

APR (Annual Percentage Rate) and APY (Annual Percentage Yield) are two standards for measuring returns, differing in whether compound interest is considered. APR is a simple interest rate: each interest period's income is calculated based on a fixed principal, with interest not earning further interest. APY is a compound return: interest earned each period is automatically added back to principal, with the next period calculated on a larger principal — the longer the period, the more significant the compounding effect. In DeFi, APY is more common as most liquidity mining, <a href="/en/glossary/defi-basics/staking/">Staking</a>, and lending protocol yields are automatically compounded (or can be manually reinvested). The same 20% APR, with monthly compounding, yields an APY of approximately 21.94% — the gap becomes more significant in high-rate environments.

A <a href="/en/glossary/defi-basics/bridge/" target="_blank">Cross-Chain Bridge</a> is an infrastructure protocol that lets users transfer crypto assets from one blockchain to another. Because different blockchains are fundamentally independent with no direct communication, cross-chain bridges provide a technical connector — typically locking assets on the source chain and minting corresponding wrapped tokens on the destination chain. Bridges are core infrastructure for the multi-chain DeFi ecosystem, but their contracts must lock large capital, making them historically one of DeFi's most frequently hacked and largest-loss attack targets.

A crypto lending protocol is a decentralized finance platform in the DeFi ecosystem that lets users deposit assets to earn interest, or collateralize assets to borrow other tokens. Unlike traditional banks, it has no credit checks, no paperwork, and requires no intermediary institution — you simply deposit tokens or provide collateral and smart contracts automatically manage the entire lending process. The core mechanism is overcollateralization: you must deposit collateral worth more than what you want to borrow, ensuring lenders' funds are protected in any market condition. If collateral prices fall far enough, the protocol force-liquidates your position.

A decentralized exchange (DEX) is a trading platform that lets users swap tokens directly from a self-custody wallet, without depositing funds with any centralized institution. DEXes are built on <a href="/en/glossary/tokenization/smart-contract/" target="_blank">Smart Contract</a> infrastructure, with the most mainstream model being Automated Market Makers (AMMs) — users interact directly with liquidity pools rather than matching orders with counterparties. Throughout a DEX trade, funds stay in your own wallet; no one can freeze your funds or shut down your account. Uniswap, Curve, and PancakeSwap are typical DEXes.

A flash loan is a form of uncollateralized lending unique to DeFi: within a single blockchain transaction you can borrow any amount, execute operations, and repay the funds — all of this must complete within that one transaction, or the whole thing automatically reverts as if nothing happened. Because borrowing and repaying happen atomically in one transaction, the lender theoretically faces zero risk, so no collateral is required. It's both a brilliant DeFi financial innovation and the core tool behind many of the largest DeFi attacks in history.

When you deposit two tokens into a liquidity pool to provide market-making, if their prices diverge after you deposit, the total value you withdraw can be less than if you'd simply held the tokens. That gap is impermanent loss.

In a decentralized exchange (DEX), a fund pool formed by many people depositing two tokens, letting others trade directly against the pool without traditional buyer-seller order matching. Those who deposit are liquidity providers, who supply liquidity and earn a share of trading fees. It's the core of automated market making in DeFi.

A service that brings real-world data (such as asset prices, weather, sports scores) from outside the blockchain into smart contracts. Because blockchain is a closed system that cannot access the internet on its own, oracles serve as the 'information bridge.' But oracles can fail or be manipulated — they are among the most critical sources of centralized risk in DeFi systems.

RWA (Real-World Asset) <a href="https://rwa-bible.com/en/glossary/tokenization/tokenization/">Tokenization</a> refers to moving the ownership representation of real-world financial or physical assets — like US Treasury bonds, real estate, private credit, gold — onto a blockchain to circulate as tokens. Holding an RWA <a href="https://claude-me.com/en/glossary/core-concepts/token/">Token</a> means holding partial or full ownership or yield rights to the corresponding real-world asset. This lets fixed-income products previously accessible only to institutional investors (like US short-term Treasuries' 4-5% yield) become available to anyone with an Ethereum wallet through DeFi protocols, while letting on-chain capital be used in DeFi environments.

A crypto <a href="https://claude-me.com/en/glossary/core-concepts/token/">Token</a> designed to maintain a fixed price (typically $1), serving as a 'non-volatile unit of account' within crypto markets. Three backing methods: fiat reserves (e.g. USDC's bank deposits), over-collateralized crypto (e.g. DAI's ETH), or algorithmic supply adjustment (e.g. the collapsed UST).

Staking means locking tokens you hold into a blockchain protocol or validator <a href="/en/glossary/blockchain-fundamentals/node/">Node</a> to support network security and consensus operations, in exchange for token rewards. On public chains using proof-of-stake (PoS) or its derivatives, validators must stake tokens as collateral — performing well earns <a href="/en/glossary/blockchain-fundamentals/block/">Block</a> rewards, while misconduct or downtime may result in part of the stake being slashed. For everyday users, staking is a way to earn yield on holdings, but it typically comes with a lock-up period during which funds can't be freely withdrawn.

The total value of all assets deposited into a DeFi protocol's smart contracts, converted to USD at current market prices. The most commonly used metric for measuring DeFi protocol scale and user trust, but the number fluctuates with token prices and is susceptible to double-counting or artificial manipulation.

A <a href="https://claude-me.com/en/glossary/core-concepts/token/">Token</a> on one blockchain that represents an asset from another blockchain. For example, wBTC (wrapped Bitcoin) is an ERC-20 token on Ethereum that represents 1 Bitcoin. The original asset is locked on its native chain, and a wrapped version is issued 1:1 on the target chain. Purpose: enable cross-chain asset liquidity and trading.

<a href="/en/glossary/defi-basics/yield-farming/" target="_blank">Yield Farming</a> means depositing your crypto assets into DeFi protocols (such as liquidity pools or lending protocols) to earn returns. The returns usually have two sources: <a href="https://rwa-bible.com/en/glossary/rwa-fundamentals/real-yield-rwa/">Real Yield</a> from the protocol's operation (like trading fees or lending interest) plus extra <a href="https://claude-me.com/en/glossary/core-concepts/token/">Token</a> rewards the protocol hands out. The advertised APY is often very high, but a large part typically comes from token rewards — once rewards stop or the token depreciates, the real return shrinks sharply.