defi-fundamentals

An underlying infrastructure letting different blockchains pass information and trigger each other's <a href="https://crypto-bible.com/en/glossary/blockchain-fundamentals/smart-contract/" target="_blank" rel="noopener">Smart Contract</a> actions, often paired with the bridging function covered in an earlier article, but essentially handling the more foundational problem of 'trustworthy message delivery' — bridging an asset transfer is just one of the many use cases built on top of this mechanism.

The fee required to execute any operation on an EVM-compatible chain (e.g., Ethereum, Base), denominated in the chain's native token. <a href="/en/glossary/defi-fundamentals/gas-fee/">Gas Fee</a> = gas used × gas price; gas used is determined by operation complexity, and gas price is determined by real-time market supply and demand.

A <a href="/en/glossary/defi-fundamentals/layer-2/">scaling solution</a> built on top of a Layer 1 blockchain (e.g., Ethereum). By executing large numbers of transactions off-chain and submitting compressed results to the main network, L2s achieve faster transaction speeds and dramatically lower <a href="/en/glossary/defi-fundamentals/gas-fee/">gas</a> fees, while inheriting the security guarantees of the mainnet.

Bringing stocks, government bonds, real estate, private credit, and other physical or financial assets originally existing within the traditional financial system onto a blockchain through tokenization, letting these assets be traded, used as collateral, or generate yield within DeFi protocols — a <a href="/en/glossary/security-risk/bridge/">bridge</a> connecting traditional finance with the on-chain world.

A protocol directly distributes its own actually-earned revenue (such as trading fees or lending interest spread) to token holders or liquidity providers, rather than paying yield by continuously issuing new tokens — letting the yield's source genuinely correspond to the protocol's real business activity, not purely supply dilution.

Taking ETH (or its derivative liquid <a href="https://crypto-bible.com/en/glossary/defi-basics/staking/" target="_blank" rel="noopener">Staking</a> <a href="https://claude-me.com/en/glossary/core-concepts/token/" target="_blank" rel="noopener">Token</a>) already staked on the Ethereum mainnet to secure the network, and staking it again toward other services or applications needing security guarantees — letting the same capital simultaneously secure multiple systems while stacking multiple return sources.

A measure of the total market value of assets deposited in a DeFi protocol or across an entire ecosystem, often used as an intuitive gauge of a protocol's scale and market trust, but not equivalent to a protocol's revenue or actual user count.

An ERC-20 token issued on the Ethereum network, with a custodian holding an equivalent amount of real Bitcoin as 1:1 reserve backing, letting an asset originally only circulating on Bitcoin's own chain enter the Ethereum ecosystem to participate in DeFi lending, trading, and liquidity provision — the largest-scale, most representative concrete implementation of the wrapped token mechanism covered in an earlier article.

A token that tracks the value of another asset at a 1:1 ratio, enabling an asset that cannot be used natively on a given chain or protocol standard to circulate in different chain or protocol environments. The most common examples are WBTC (Bitcoin's Ethereum-native representation) and WETH (ETH conforming to the ERC-20 standard on Ethereum).