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General Glossary
Short explainers on all generic terms used within this documentation.

AMM

Automated Market Maker, Smart Contract based Market Maker. Usually the model used to provide liquidity to Decentralized Exchanges.

APY

Annual Percentage Yield. See: Yield.

Audit

A review of software safety and quality, usually done by a third party.

Bug Bounty

A bounty, often paid in cash, reserved for participants and white-hat hackers who find bugs.

Capital Aggregator

Entity that aggregates capital from multiple users. Examples include: Wallet services, Exchanges and Mobile Crypto Applications.

Collateral Ratio

Percentage of backing of a loan. If $1 worth of ETH is deposited and $0.5 USDC can be borrowed in return: The Collateral Ratio is 2. ($1/$0.5)

Compounding (To compound, verb)

Crediting interest to the existing principal. Compounding in DeFi mostly refers to converting Governance Tokens to stablecoins or Ether and depositing the freshly acquired assets back into a DeFi Protocol.

DAI

Decentralized Stablecoin, overcollateralized and issued by DeFi Protocol MakerDAO.

DAO

Decentralized Autonomous Organization, entity that manages a DeFi Protocol controlled by organization members.

Decentralized

An entity or construct that is not governed by a central entity. For simplicity's sake: A "bank" is centralized, a crypto wallet isn't.

DeFi

Decentralized Finance, a collection of a Financial Ecosystem where no Central entity is present.

DEX

Decentralized Exchange, a type of cryptocurrency exchange which allows for direct peer-to-peer cryptocurrency transactions to take place online securely and without the need for an intermediary.

Diversification

The art of spreading risk across multiple assets or locations.

ERC20 Token

The Smart Contract Token Standard on the Ethereum Blockchain.

ETH

Ethereum.

EVM

Ethereum Virtual Machine, Smart Contract Blockchain Environment. The "computer" that runs DeFi.

Gas Costs

The costs associated with submitting a transaction to the Ethereum Blockchain.

KPI

Key Performance Indicator, an indicator that can be used to measure performance of an individual or company/team.

LBP

Liquidity Bootstrapping Event, fair launch sale process introduced by Balancer.

Leverage

Borrowing money in order to increase exposure to a certain investment.

Liquidity

Definition of assets available for trading against, such as assets held by counter parties.

Liquidity Provision

Offering the option, but not the obligation for other market participants to transact X for Y with you.

Middleware

Software that sits between the backend and the frontend. Middleware is easily understood as software that the user doesn't notice is being used.

Non-Custodial

Holding funds in a location without that location being held by a (central) party.

Performance Fees

Fees paid over positive performance, "fees over profit, and profit only".

Portfolio

Your personal holdings.

PreDAO

The DAO consisting out of preDAO members, joining development prior to Token Launch.

Proprietary

In-house developed.

Protocol

Autonomous "software" on the blockchain.

Protocol Generated Revenue

Revenue generated by a DeFi Protocol.

Risk Appetite

The willingness to take risk, someone trading high leverage has a high appetite for risk.

SDK

Software Development Kit, well-documented and easy way to integrate middleware in existing software solutions.

Secondary Market

Market where investors exchange assets with other investors.

Smart Contract

Program or set of rules executed on the blockchain without counterparty risk.

Speculation

The act of taking risk in the assumption that your view of the market comes to fruition. "He is speculating on the price of Bitcoin by buying BTC."

Stablecoin

Crypto Token that represents one United States Dollar in value.

Swaps

Decentralized "trade": "Swapping ETH for USDC on Uniswap".

Token

Virtual (Crypto) currency, issued by a DAO or company.

Treasury

Available funds of a DAO, in the context of this documentation.

TVL

Total Value Locked, The current value locked in a DeFi Protocol denominated in USD.

TVR

Total Value Routed, since Spool "Routes" deposits to different Yield Generators the term TVR is most fitting when describing the total amount of deposits in the Spool Ecosystem.

UI

User Interface, most often refers to a website.

USDC

Fiat backed stablecoin issued by Circle.

Vault

In DeFi refers to a Smart Contract containing assets with the intent to generate "Yield".

Wallet

Device, physical medium or software that stores the private key to your blockchain wallet address.

Web3

Common definition for an upgraded internet based on decentralized infrastructure.

Yield

Return on an investment over a set period of time. 10% annual percentage yield refers to receiving 10% of your collateral in profits over the course of a year.

Yield Farming

The act of engaging with DeFi Protocols in order to obtain the aforementioned yield.
A DeFi protocol where users can participate with the intent to generate yield.

Yield Optimizer

DeFi protocols that aims to optimize yield generation for its users.