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Glossary

Common terms and definitions used in DeFi and Naga protocol.

A​

APY (Annual Percentage Yield)​

The annualized rate of return on an investment, accounting for compound interest. Shows how much you can expect to earn over a year.

APR (Annual Percentage Rate)​

The annual rate of return without accounting for compounding. Generally lower than APY.

Assets​

Cryptocurrencies or tokens that have value and can be traded, deposited, or used as collateral.

B​

Blockchain​

A distributed, immutable ledger that records transactions across a network of computers.

Borrowing​

Taking out a loan by depositing collateral. The borrowed amount must be repaid with interest.

C​

Collateral​

Assets deposited to secure a loan. If the loan isn't repaid or LTV exceeds limits, collateral can be liquidated.

Collateralization Ratio​

The ratio of collateral value to borrowed amount. Higher ratio = safer position.

Composability​

The ability for DeFi protocols to interact and build on each other, like financial "Lego blocks."

D​

DeFi (Decentralized Finance)​

Financial services built on blockchain technology without traditional intermediaries like banks.

DEX (Decentralized Exchange)​

A platform for trading cryptocurrencies without a central authority.

Deposit​

Adding funds to a vault or protocol to earn yield or provide collateral.

E​

ERC-20​

A standard for fungible tokens on Ethereum and compatible blockchains.

F​

Fungible Token​

A token that is interchangeable with others of the same type, like USDT or ETH.

G​

Gas Fee​

The cost paid to execute transactions on the blockchain, paid to validators/miners.

Governance Token​

A token that gives holders voting rights on protocol decisions.

I​

Interest Rate​

The cost of borrowing or return on lending, usually expressed as an annual percentage.

L​

Liquidity​

The ease of buying or selling an asset without significantly affecting its price. High liquidity = easier trading.

Liquidity Provider (LP)​

Someone who deposits assets into a liquidity pool to enable trading or lending.

Liquidation​

The forced sale of collateral when a borrower's position becomes too risky (LTV exceeds maximum).

LLTV (Loan-to-Value Ratio)​

The maximum percentage of collateral value that can be borrowed. For example, 80% LLTV means you can borrow up to 80% of your collateral's value.

LTV (Loan-to-Value)​

Your current borrowed amount as a percentage of collateral value. Differs from LLTV, which is the maximum allowed.

M​

MetaMask​

A popular Web3 wallet browser extension for managing cryptocurrency and interacting with DeFi applications.

Multi-sig (Multi-signature)​

A wallet or contract that requires multiple signatures to execute transactions, improving security.

N​

Non-Custodial​

A system where users maintain control of their own funds, rather than trusting a third party.

O​

Oracle​

A service that provides external data (like prices) to smart contracts on the blockchain.

Over-collateralization​

Depositing collateral worth more than the borrowed amount, providing a safety buffer against price volatility.

P​

Pool​

A collection of funds locked in a smart contract, used for trading, lending, or other DeFi functions.

Principal​

The original amount deposited or borrowed, excluding interest or fees.

Protocol​

A set of smart contracts that define the rules for a DeFi application.

R​

Rebalancing​

Adjusting portfolio allocations to maintain desired risk levels or improve performance.

Rewards​

Additional tokens earned for participating in a protocol, often used to incentivize liquidity provision.

S​

Slippage​

The difference between expected and actual execution price of a trade, usually due to market movement or low liquidity.

Slippage Tolerance​

The maximum price change you're willing to accept for a trade to execute.

Smart Contract​

Self-executing code on a blockchain that automatically enforces agreement terms without intermediaries.

Stablecoin​

A cryptocurrency designed to maintain a stable value, usually pegged to fiat currency like USD (e.g., USDC, USDT).

Strategy​

An automated approach for managing assets to generate yield, often involving multiple protocols.

Swap​

Exchanging one cryptocurrency for another.

T​

Token​

A digital asset on a blockchain, representing value, utility, or ownership.

TVL (Total Value Locked)​

The total amount of assets deposited in a protocol or vault. Higher TVL generally indicates more trust and adoption.

Transaction​

An action recorded on the blockchain, such as a token transfer or smart contract interaction.

U​

Utilization Rate​

The percentage of available funds currently being borrowed. Higher utilization typically leads to higher interest rates.

V​

Vault​

A smart contract that accepts deposits and automatically deploys them in yield-generating strategies.

Volatility​

The degree of price fluctuation in an asset. High volatility = larger price swings.

W​

Wallet​

Software or hardware that stores your private keys and allows you to interact with blockchain applications.

Web3​

The next generation of the internet built on blockchain technology, emphasizing decentralization and user ownership.

Whale​

A person or entity holding a very large amount of cryptocurrency, capable of significantly influencing market prices.

Withdrawal​

Removing funds from a vault or protocol, converting shares back to underlying assets.

Y​

Yield​

The return on investment, typically expressed as a percentage. Includes interest, rewards, and appreciation.

Yield Farming​

The practice of moving assets between different DeFi protocols to maximize returns.

Need More Information?​

If you come across a term not listed here:

  • Ask in our Telegram community
  • Check the specific feature documentation
  • Search online DeFi glossaries for more technical terms