0xMalik 🥷🏿 @Maleektimi - Twitter Profile

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⏳ This is a side quest where I simplify key DeFi terms for new users in the web3 space - PART 2 Missed the first part? No worries, you can catch up later—It’ll be in the comments :) Today, we're continuing our journey with more terms. Ready? let’s get into it. 1️⃣ Liquidity Pool (LP) Liquidity basically means money. Think of it as a big pot of money (cryptocurrencies) that people (liquidity providers) contribute to. These pools help decentralized exchanges run smoothly and let users trade crypto without directly needing to trade with buyers or sellers. 2️⃣ Stablecoin A cryptocurrency with a stable value, often tied to fiat, like the US Dollar. For example, USDT or USDC. It is useful for avoiding the price fluctuations of regular crypto, hence its name. 3️⃣ Yield Farming This is like earning interest by lending your crypto to platforms. You provide your tokens to a liquidity pool and get rewards in return—this can either be a share of trading fees collected from traders or more tokens. 4️⃣ Staking This is a popular way to earn passive income with crypto. You lock up or stake your coins to help secure a blockchain network, and in return, you get more coins as rewards. This reward may be the same coin you staked or another token in the blockchain. 5️⃣ Tokenomics This is just the “economics” of a token or cryptocurrency. It includes its total supply and how it is created, distributed, and used. N.B. Tokenomics has a huge impact on a cryptocurrency's value, both in the short and long run. 6️⃣ Governance Token In crypto, governance tokens are like membership cards that give you voting rights to a project. With it, you can vote on the kind of activities to be done or decisions to be made. In summary, they're tokens that let holders vote on decisions about a project. 7️⃣ AMM (Automated Market Maker) This is a system used by decentralized exchanges (DEX) to set prices automatically and let you trade crypto instantly. It replaces the order book used by centralized exchanges. Just in case, an order book records all the buy and sell orders for a specific trading pair. For example, BTC/USDT. 8️⃣ DEX (Decentralized Exchange) Think about a big market where people come to trade without needing a shop to facilitate the trade. That's how DEXs work. Decentralized exchanges allow you to trade crypto directly in a secure, transparent environment without needing a middleman. A smart contract handles everything instead. 9️⃣ Layer 1 (L1) Blockchain The fundamental layer where a blockchain network operates directly. It does all the heavy lifting, including security, creation of blocks, transaction processing and recording. It sets the stage for building Layer 2 solutions. 🔟 Layer 2 (L2) Solution Layer 2s are like express lanes built over the main road to manage traffic more efficiently. It is built on top of Layer 1s to make transactions on a blockchain faster and cheaper. For example, Base is a Layer 2 for Ethereum. And that's a wrap guys. I hope you got value. We continue in the next part. Feel free to ask questions if you have any. Ciao!

Maleektimi's tweet photo. ⏳ This is a side quest where I simplify key DeFi terms for new users in the web3 space - PART 2

Missed the first part? No worries, you can catch up later—It’ll be in the comments :)

Today, we're continuing our journey with more terms.
Ready? let’s get into it.

1️⃣ Liquidity Pool (LP)
Liquidity basically means money.
Think of it as a big pot of money (cryptocurrencies) that people (liquidity providers) contribute to. These pools help decentralized exchanges run smoothly and let users trade crypto without directly needing to trade with buyers or sellers.

2️⃣ Stablecoin
A cryptocurrency with a stable value, often tied to fiat, like the US Dollar. For example, USDT or USDC. It is useful for avoiding the price fluctuations of regular crypto, hence its name.

3️⃣ Yield Farming
This is like earning interest by lending your crypto to platforms. You provide your tokens to a liquidity pool and get rewards in return—this can either be a share of trading fees collected from traders or more tokens.

4️⃣ Staking
This is a popular way to earn passive income with crypto. You lock up or stake your coins to help secure a blockchain network, and in return, you get more coins as rewards. This reward may be the same coin you staked or another token in the blockchain.

5️⃣ Tokenomics
This is just the “economics” of a token or cryptocurrency. It includes its total supply and how it is created, distributed, and used.
N.B. Tokenomics has a huge impact on a cryptocurrency's value, both in the short and long run.

6️⃣ Governance Token
In crypto, governance tokens are like membership cards that give you voting rights to a project. With it, you can vote on the kind of activities to be done or decisions to be made.
In summary, they're tokens that let holders vote on decisions about a project.

7️⃣ AMM (Automated Market Maker)
This is a system used by decentralized exchanges (DEX) to set prices automatically and let you trade crypto instantly. It replaces the order book used by centralized exchanges.

Just in case, an order book records all the buy and sell orders for a specific trading pair. For example, BTC/USDT.

8️⃣ DEX (Decentralized Exchange)
Think about a big market where people come to trade without needing a shop to facilitate the trade. That's how DEXs work.

Decentralized exchanges allow you to trade crypto directly in a secure, transparent environment without needing a middleman. A smart contract handles everything instead.

9️⃣ Layer 1 (L1) Blockchain
The fundamental layer where a blockchain network operates directly. It does all the heavy lifting, including security, creation of blocks, transaction processing and recording. It sets the stage for building Layer 2 solutions.

🔟 Layer 2 (L2) Solution
Layer 2s are like express lanes built over the main road to manage traffic more efficiently.

It is built on top of Layer 1s to make transactions on a blockchain faster and cheaper. For example, Base is a Layer 2 for Ethereum.

And that's a wrap guys. I hope you got value.

We continue in the next part. Feel free to ask questions if you have any.

Ciao!

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