A list of words and terms you can find using YieldRocket
Some terms used throughout the documentation may be unfamiliar to our readers. Below, we list some common terms that will help you with your understanding.
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Last updated
Term
Description
APR
Annual Percentage Rate. A measure of the anticipated return to be generated by a deposit over the course of a year, assuming that the current performance is maintained over that time period. Does not factor in compounding.
APY
Annyal Percentage Yield. A measure of the anticipated return to be generated by a deposit over the course of a year, assuming that the current performance is maintained over that time period. Unlike APR, APY factors the effects of compounding over the course of the year into the return. See also APR, ROI.
Compouding
The process of repeatedly using a yield-producing deposit's earnings to generate additional earnings alongside the principal over a period of time, which allows for an exponential rate of growth rather than a linear one.
Custodial
A service which holds cryptocurrency assets without giving users access to the private keys that cryptographically prove ownership of those assets. The service maintains direct ownership, and manages assets on the users’ behalf. Centralized exchanges and CeFi services are custodial. DeFi protocols and wallets like MetaMask are non-custodial.
Non-custodial
A service or software which manages cryptocurrency assets while giving users full control over the private keys that cryptographically prove ownership of those assets. DeFi protocols and wallets like MetaMask are generally non-custodial, as opposed to centralized exchange (CEX) and centralized finance (CeFi) services.
DEX
A smart contract based venue for buying and selling cryptocurrencies that does not rely on a centralized entity to make the market and process trades. Instead of a centralized market maker, individuals provide liquidity through trades via the Automated Marker Maker (AMM) model. Popular DEXs include Pancakeswap and Apeswap.
LP Token
A token given to liquidity providers as a receipt for their deposit of assets into a liquidity pool. Can be traded or used with DeFi smart contacts just as like other token.
Liquidity Pool
A pool of assets used by a decentralized exchange (DEX) that uses that automated market maker (AMM) method of creating a venue for crypto asset trading. Pools are supplied tokens by liquidity providers.
Liquidity provider
A user who has deposited assets into a liquidity pool for use by a decentralized exchange (DEX) for automated market making (AMM). Liquidity providers are generally incentivized to deposit assets into the pool by receiving incentive rewards, often in the form of governance tokens from the DeFi protocols involved with the pool.
ROI
Return on Investment. A measure of the performance of a deposit over a time period, often a year. Measures the difference between the initial amount of the deposit and its current value. May be expressed as a raw value, or a rate of return using methods like APR or APY.
Strategy
A set of rules and instructions contained in the smart contracts for a DeFi vault in order to maximize yield for users who deposit their funds into the contract.
TVL
Total Value Locked. The dollar value of all of the cryptocurrency deposited by users in a DeFi protocol’s smart contracts. A popular measure of the relative size of a particular protocol within the DeFi space.
Vault
A DeFi product that users deposit funds into, which are then put to use by smart contract -based automated strategies to generate yield. Vaults often deposit user funds into other DeFi protocols on their behalf, and manage those funds in a way that maximizes yield and minimizes transaction fees.
Withdrawal Fee
A fee deduced from one’s balance when removing funds from a vault or other DeFi product. Withdrawal fees provide revenue to DeFi protocols, and also serve an important security function.
Yield
The return on a particular deposit, usually stated as APY, APR, or ROI. Unlike traditional finance’s simple interest or fixed-income yield, DeFi offers a number of sources of yield, usually combined into some form of yield farming.
Zap
Allows for depositing into a liquidity pool using any token in one’s wallet, instead of requiring the exact tokens being used by the product. The zap contract performs a swap using a decentralized exchange (DEX) from the token provided to the appropriate underlying token.
