nirholas Web3 & DeFi Glossary
Quick-reference glossary for AI agents helping users navigate crypto terminology.
A
Account Abstraction (ERC-4337): Standard for smart contract wallets that enables features like gasless transactions, social recovery, and batched operations.
Airdrop: Free distribution of tokens to wallet addresses, usually to reward early users or build community.
AMM (Automated Market Maker): DEX model using liquidity pools and mathematical formulas instead of order books. Examples: Uniswap, Camelot.
APR (Annual Percentage Rate): Yearly return WITHOUT compounding.
APY (Annual Percentage Yield): Yearly return WITH compounding. Always higher than equivalent APR.
Arbitrage: Profiting from price differences between markets. Key for maintaining stablecoin pegs (e.g., USDs mint/redeem arbitrage).
Arbitrum: Ethereum Layer 2 using optimistic rollups. Largest L2 by TVL. Home of Sperax (USDs, SPA, Farms).
B
Block: A batch of transactions confirmed together. Ethereum: ~12 sec, Arbitrum: ~2 sec.
Bridge: Protocol for moving assets between blockchains. Examples: Stargate, Across, Hop.
Buyback-and-Burn: Protocol uses revenue to buy tokens on the market and permanently destroy them. Sperax uses 30% of USDs yield for SPA buyback-and-burn.
C
CDP (Collateralized Debt Position): Locking collateral to mint/borrow assets. Used by Maker (DAI) and Liquity (LUSD).
CEX (Centralized Exchange): Traditional crypto exchange (Coinbase, Binance). Custodial — they hold your keys.
Concentrated Liquidity: V3-style LP where you choose a price range. Higher capital efficiency but higher impermanent loss risk.
Composability: The ability to combine DeFi protocols like building blocks. "DeFi Legos."
D
DAO (Decentralized Autonomous Organization): Community-governed organization using smart contracts and token voting.
DCA (Dollar Cost Averaging): Investing fixed amounts at regular intervals to reduce timing risk.
DeFi (Decentralized Finance): Financial services built on blockchain — lending, trading, yield farming without intermediaries.
DEX (Decentralized Exchange): Exchange where trades execute via smart contracts. Non-custodial. Examples: Uniswap, Camelot.
DEX Aggregator: Tool that checks multiple DEXs for the best swap price. Examples: 1inch, Paraswap, 0x.
E
E-Mode (Efficiency Mode): Aave V3 feature allowing higher LTV for correlated asset pairs (like stablecoin-to-stablecoin).
ERC-20: Standard interface for fungible tokens on Ethereum.
ERC-721: Standard for non-fungible tokens (NFTs).
ERC-8004: Standard for on-chain AI agent identity, reputation, and validation. Created by Sperax. Deployed on 12 chains.
EVM (Ethereum Virtual Machine): The execution environment for smart contracts. Used by Ethereum and compatible chains (Arbitrum, Base, Polygon, etc.).
F
Flash Loan: Uncollateralized loan that must be borrowed and repaid in a single transaction. Used for arbitrage and liquidations.
Frontrunning: Placing a transaction ahead of another to profit from the price impact. A type of MEV.
G
Gas: Fee paid to execute transactions on a blockchain. Paid in the native token (ETH for Ethereum/Arbitrum).
Governance: Decision-making process for protocol changes. Usually through token-weighted voting.
H
Health Factor: In lending protocols, ratio of collateral value to debt. Below 1.0 = liquidatable.
Honeypot: Scam token you can buy but can't sell.
I
Impermanent Loss (IL): Value difference between holding tokens in an LP vs just holding. "Impermanent" because it reverses if prices return to original ratio.
L
Layer 1 (L1): Base blockchain (Ethereum, Bitcoin, Solana).
Layer 2 (L2): Scaling solution built on top of L1. Types: Optimistic Rollups (Arbitrum, Optimism), ZK Rollups (zkSync, StarkNet).
Liquidation: When a borrower's collateral value drops below the required ratio and their position is forcibly closed.
Liquidity: How easily an asset can be traded without significant price impact.
LTV (Loan-to-Value): Maximum borrowing power relative to collateral value.
M
MEV (Maximal Extractable Value): Profit extracted by reordering/inserting transactions. Includes sandwich attacks and frontrunning.
Multisig: Wallet requiring multiple signatures to execute transactions. Used for protocol treasuries and security.
N
NFT (Non-Fungible Token): Unique token representing ownership (art, agent identity via ERC-8004, LP positions in V3).
O
Oracle: Service providing external data (prices) to smart contracts. Chainlink is the dominant provider.
Over-Collateralized: When collateral value exceeds the borrowed amount (e.g., 150% collateral for 100% loan).
P
Peg: Target price for a stablecoin (usually $1 USD).
Permit (EIP-2612): Gasless token approval via signed message instead of on-chain transaction.
Pool: Smart contract holding tokens for trading or lending.
R
Rebase: Mechanism where token supply adjusts to distribute yield. USDs uses rebasing — your balance grows automatically.
Rug Pull: Scam where developers create a project, attract funds, and drain the liquidity.
S
Sandwich Attack: MEV attack: buy before your swap (frontrun), your swap executes at worse price, sell after (backrun).
Slippage: Difference between expected and actual swap price.
Smart Contract: Self-executing code on a blockchain.
Staking: Locking tokens to earn rewards. SPA → veSPA staking earns protocol fees + xSPA.
T
TVL (Total Value Locked): Total value deposited in a DeFi protocol. Key adoption metric.
Timelock: Delay between governance vote passing and execution, giving users time to react.
Token Approval: Permission given to a smart contract to spend your tokens.
U
USDs: Sperax's auto-yield stablecoin on Arbitrum. 100% collateralized by USDC/USDT. Yield distributed automatically via rebase.
Utilization Rate: In lending, ratio of borrowed to supplied assets. High utilization = high rates.
V
Vault: Smart contract that automates a yield strategy. Examples: Yearn vaults, Beefy vaults.
veToken (Vote-Escrowed): Governance model where locking tokens grants time-weighted voting power. veSPA = locked SPA.
veSPA: Vote-escrowed SPA. Lock SPA for 7d–4y. Earns protocol fees + xSPA rewards weekly.
W
Wallet: Software/hardware storing private keys. Types: hot (MetaMask), cold (Ledger), smart contract (Safe).
Whale: Large token holder who can significantly impact price.
Wrapped Token: Token representation of another asset (WETH = wrapped ETH, WBTC = wrapped Bitcoin).
X
xSPA: Reward token distributed to veSPA stakers. Can be staked (→ veSPA) or redeemed (→ 0.5–1.0 SPA over time).
Y
Yield Farming: Providing liquidity or staking to earn token rewards.
Yield Aggregator: Protocol that automatically compounds yield (Yearn, Beefy).
Links
- Sperax Ecosystem: https://chat.sperax.io
- Ethereum Docs: https://ethereum.org
- DeFi Llama: https://defillama.com