What are "Degen" and "Ape"? 20 English words you must know in the DeFi craze

"Degen" and "Ape" are frequently seen words in the DeFi community on Twitter. What do they mean and how can they be translated into Chinese? Here are 20 English terms that can help you understand information in the DeFi craze and become a trendy cryptocurrency investor quickly.

This vocabulary selection is from the article by Consensys, an Ethereum technology company, and interviews and surveys.

20 Common English Words in DeFi

1. DeFi

DeFi stands for Decentralized Finance, which refers to decentralized finance. Some also refer to it as Democratized Finance.

Most DeFi platforms are built on the Ethereum blockchain, involving decentralized trading, lending, financial strategies, insurance, prediction markets, etc., all falling under the DeFi category. Although DeFi is seen as a promising financial technology and is expected to promote inclusive finance, it is currently mostly used for arbitrage and speculation.

2. CeFi

"Centralized Finance," also known as CeFi, emerged after the rise of DeFi. Major exchanges like Binance and OKEx have introduced more financial products like coin mining and wealth management products, similar to fixed-term deposits or DeFi-like liquidity mining products, all falling under CeFi.

Platforms are typically categorized as DeFi or CeFi based on their centralization. With the continuous rise in Ethereum gas fees, further excluding small retail investors, the Binance Smart Chain (BSC) has gained popularity, with some categorizing BSC as CeDeFi, a more centralized form of DeFi.

3. Total Value Locked (TVL)

"Total Value Locked" refers to the total value of assets deposited by users into a specific platform. Some data websites use TVL to rank DeFi protocols, with Defi Pulse being a mainstream TVL data platform. However, it may not entirely represent a platform's success; for example, for Automated Market Maker (AMM) decentralized exchanges (DEXs), trading volume is also crucial.

TVL is not limited to DeFi; it can measure the staking value of Ethereum 2.0 deposit contracts, various cryptocurrency staking values, or cross-chain assets like Wrapped Bitcoin (WBTC).

4. DEX

"Decentralized Exchange" (DEX) refers to exchanges operated by smart contracts such as Uniswap, SushiSwap, Kyber, etc., falling under the DeFi domain. Consensys, an Ethereum application development company, believes that DEXs will start attracting regulatory attention in the coming months.

5. Automated Market Makers (AMM)

Automated Market Makers (AMM) operate differently from traditional order book exchanges on centralized platforms. Each AMM has a basic liquidity pool. For example, Uniswap uses the constant product market maker algorithm ("x * y = k"), where the product of the quantities of two assets remains constant. When a user buys WBTC in the WBTC-ETH pool on Uniswap, the price of WBTC increases due to the algorithm, while the price of ETH decreases.

6. Liquidity Providers (LPs)

"Liquidity providers" are users who provide liquidity in decentralized exchanges like Uniswap. By depositing Bitcoin and Ethereum into the WBTC-ETH pool, these users provide trading liquidity, making them liquidity providers.

7. Yield Farming / Liquidity Mining

"Yield farming / Liquidity mining" has gained popularity in the DeFi space. Users can earn platform tokens as rewards for providing liquidity to DeFi platforms or protocols through activities like trading, lending, and borrowing.

8. Impermanent Loss

"Impermanent loss" often occurs in liquidity pools where liquidity providers must supply two assets at a fixed ratio. If the price of one asset rises, LPs may experience value loss if they decide to withdraw their liquidity.

9. Gas Tracker

"Gas Tracker" is a tool to check current transaction fees on the Ethereum network. With the rise in Ethereum gas fees, monitoring transaction fees is crucial.

10. Layer 2 (L2) Solutions

"Layer 2 solutions" are secondary blockchain networks built on top of Layer 1 chains like Ethereum to address transaction speed and scalability issues.

11. Staking

"Staking" involves users depositing tokens to earn rewards in blockchain networks with Proof of Stake (PoS) consensus mechanisms.

12. Aggregators & "Aggs of aggs"

"Aggregators" are decentralized exchange platforms that aggregate liquidity pools from different platforms to provide users with the best trading prices.

13. Swapping & Slippage

"Slippage" occurs when markets experience price differences due to insufficient liquidity. In DeFi, Automated Market Makers (AMMs) determine prices algorithmically, causing slippage when liquidity is low.

14. Flash Minting / Flash Loans

"Flash minting / Flash loans" allow users to borrow assets without collateral through smart contracts, often exploited by hackers, leading to significant losses in DeFi protocols.

15. Governance Token / DAO

"Decentralized Autonomous Organization" (DAO) allows token holders to vote on protocol governance and development, a governance model followed by many DeFi protocols.

16. Rug Pull

"Rug Pull" refers to situations where DeFi platforms exit scams, often targeting unsuspecting users in lesser-known projects.

17. SFYL (Sorry For Your Loss)

"Sorry For Your Loss" is used to console individuals who have suffered significant losses in scams or speculative investments.

18. Shilling

"Shilling" refers to aggressively promoting specific projects or assets, often seen in various communities.

19. Degen

"Degen" is short for degenerate, often used to describe DeFi gamblers or experienced players who take risks without considering security audits.

20. Ape

"Ape" refers to DeFi players who enter trades boldly without much consideration, akin to "going all in" on a trade.

Additional: Degen and Ape

During an interview with Huang Li-Cheng, he explained that "Degen" sometimes refers not only to savvy DeFi veterans but also to developers who are adept at creating various play-to-earn games. As for "Ape," in a bull market, those who take bold risks can profit, while overly cautious individuals may not achieve significant gains.