Our own Terms Explicatory Dictionary (TEX)

ICOs – Initial Coin Offerings
These are fundraiser events where a cryptocurrency can be bought in the early stages. The purchase is made in the hope that price of the cryptocurrency will grow in the future. They were popular around 2018 and have since mostly been replaced by IEOs and IDOs.

IEOs – Initial Exchange Offerings
This is a form of ICO where a centralized exchange oversees the distribution of the sales and sets the price. This means that the exchange acts as a guarantor and vets the project limiting scams and this makes it highly dependent on the reputation of the exchange.

IDOs – Initial DEX Offerings or Initial Decentralized Exchanges Offerings
This is another form of coin offering where coins are launched through decentralized exchanges and although typically there is a lower capital requirement to enter, this is not a guarantee. It does offer a transparent pricing mechanism (using AMMs) and smart contracts manage the process.

DEXs – Decentralized Exchanges
This is a peer-to-peer cryptocurrency exchange that operates without a central authority (without a bank or a government). It runs smart contracts and users maintain control of the funds (non-custodial). It uses smart contracts to manage trading and maintain liquidity pools all while executing transactions automatically. It has direct multiple wallet connections and does not require account creation. It provides immediate access to funds.
Examples of decentralized exchanges are: Uniswap (Ethereum), PancakeSwap (BSC), SushiSwap (Multi-chain), Curve (Stable assets), Dyed (Derivatives).

CEXs – Centralized Exchanges
These are the traditional cryptocurrency exchange platforms operated by a company that serves as an intermediary between traders. It does require user registration and is custodial (holds user funds) and the trading is based on an order book that matches buyers and sellers. It provides real-time price updates and handles multiple order types. It has a higher liquidity, faster execution and lower transaction fees. It is subjected to regulatory compliance (KYC, AML, trading license, tax reporting, jurisdictional restrictions).
Examples of centralized exchanges: Binance, Coinbase, Kraken, Gemini, KuCoin.

AMMs – Automated Market Markers
These are decentralized trading mechanisms that enable trading using formulas and liquidity pools instead of traditional order books. The price adjusts automatically based on pool ratios and large trades cause significant price impacts. They maintain a constant liquidity availability and operate 24/7 without human intervention.

AMM Models
These are the methods used by AMMs. They can either be:

• Constant product (which is the most adopted, simple and effective)

• Constant sum (better for asset pairs)

• Hybrid models (e.g., Curve, optimized for specific cases with more complex formulas in order to provide better capital efficiency)

Liquidity Pools
These are pairs of tokens founded by Liquidity Providers who deposit equal values of both tokens.

LPs – Liquidity Providers
They are individuals or entities that supply cryptocurrency pairs to trading pools in DEXs to enable trading.

IL – Impermanent Loss
This is a unique risk that liquidity providers face when providing assets to AMM pools. This happens when the price ratio of tokens in the liquidity pools changes compared to the time of the deposit, resulting in a value lower than if the tokens had been held separately. The term impermanent comes from the fact that the loss is only realized when withdrawing from the pool.

Whitepaper
This is a detailed document explaining the project and is a key component in all initial offerings. It is usually a very long document that contains everything from how the solution works to the plans for the future.

Smart Contracts
Self-executing digital contracts with terms directly encoded into code that runs on a blockchain. They are governed by code-based rules and conditions and immutable once deployed (cannot be altered once deployed). They assure transparency and are verifiable.
Usual use cases: DeFi protocols, token creation and distribution, automated market makers (AMMs), NFT minting and trading, DAO governance, insurance claims, supply chain tracking.

DeFi – Decentralized Finance
Refers to financial services and products built on blockchain technology that operate without traditional financial intermediaries.
Core components: smart contracts, decentralized networks, non-custodial wallets, permissionless access, composability (“money legos”).

DeFi Protocols
These are:

• Lending/borrowing (lend assets for interest with borrowers providing collateral)

• DEXs

• Yield farming (reward token distribution, liquidity incentives, staking mechanisms)

• Stablecoins

• Derivatives (synthetic assets, options trading)

• Insurance (smart contract coverage, staking-based claims, decentralized risk pools, automated payouts)

Stablecoins
Digital tokens designed to maintain a relatively stable value when compared to a specific asset like the USD. They are aimed at reducing cryptocurrency volatility and offer easier trading and value storage.

• Fiat-Collateralized Stablecoins – Backed by traditional currency at a 1:1 backing ratio and require regular audits.
  Examples: USDT (Tether), USDC.

• Crypto-Collateralized Stablecoins – Backed by other cryptocurrencies and use smart contracts for management.
  Example: DAI

• Algorithmic Stablecoins – Use algorithms to maintain peg and there is no physical backing. Since the supply adjusts automatically, they present a higher risk.

DAO – Decentralized Autonomous Organization
This is community-driven decision-making using token-based voting rights and smart contract automation. This ensures transparent execution, reduces the risk of manipulation, enforces community alignment while being challenging to gather voter participation and presents risks due to regulatory uncertainty, technical complexity, and coordination issues.

DAO Governance
The process through which decisions are made. Usually, a proposal is submitted, discussed, voted, and implemented.

• Submission barriers: Minimum token holdings

• Discussion: Requires expert input

• Voting: Weighted on holdings

• Voting methods: Single choice, quadratic, delegated

Gas Fees
These are transaction costs on blockchain networks. They are paid in the network’s native token and compensate network validators.
Components: Gas limit (max units) + Gas price (cost per unit)

Staking
The process of locking up cryptocurrency to support a blockchain network’s operations and earn rewards. Participants lock (stake) tokens, support network validation, and earn staking rewards. This is seen as a long-term investment option and a passive income generator but can be subject to:

• Minimum stake requirements

• Lock-up durations

• Technical requirements

• Withdrawal conditions

PoS – Proof of Stake
A mechanism where validators stake tokens, slashing risk for bad behavior. It is more energy-efficient than mining.

DeFi Staking
This type of staking locks tokens in protocols to earn yield or interest. It includes various lock-up periods and platform-specific rewards.

Exchange Staking
Staking through exchanges. Managed by the platform, it has lower technical barriers but typically offers lower returns. Also comes with less control.

Blockchain
The original technology or Layer 1. It is the native cryptocurrency model (e.g., Ethereum, Bitcoin) and has:

• Independent consensus mechanism

• Its own security model and validators

• Handles all transactions and validations

Sidechain
A parallel blockchain running alongside the main chain.

• Has its own consensus mechanism, validators, and security

• A two-way peg with the main chain

• Can have different rules or parameters

• Example: Polygon PoS Chain

L2 Chains
Built on top of Layer 1 and inherits its security.

• Processes transactions off main chain

• Sends regular state updates to L1

• Focused on scaling, reduces fees through batching

• Examples: Optimism, Arbitrum

PoW – Proof of Work
A consensus mechanism used in blockchain networks to validate transactions and create new blocks.

• Miners solve complex puzzles using computational power

• First to solve adds a new block and earns rewards

• Slower than PoS

• Examples: Bitcoin (BTC), Litecoin (LTC), Dogecoin (DOGE), Monero (XMR), Ethereum (pre-merge)

NFTs – Non-Fungible Tokens
Digital assets that cannot be copied. Due to their uniqueness, they have apparent scarcity.

• Created using ERC-721

• More info: https://ethereum.org/en/developers/docs/standards/tokens/erc-721/

Bridge
A tool that allows digital assets (tokens, data, or other assets) to transfer between two different blockchain networks.

• Enables interoperability

• Types: Centralized (third-party operated) and Decentralized (smart contract automation)

ZK – Zero-Knowledge
Refers to cryptographic methods allowing one party to prove the truth of a statement without revealing the specific details of the statement itself.

ZKPs – Zero-Knowledge Proofs
Cryptographic protocols where the prover demonstrates knowledge of information without revealing it.

• Maintains transaction confidentiality

• Aggregates multiple transactions into a single proof, reducing costs

Bull Market (and derived: Bullish)
A phase when currency prices are expected to rise, creating investor optimism, higher trading volumes, and more media attention.

Bear Market (and derived: Bearish)
A phase when the market is declining, there is pessimistic sentiment and reduced trading activity. Most investors move to stablecoins.