DeFi Glossary



Stable coin

Stablecoins are a type of cryptocurrency designed to maintain a relatively stable market value by pegging their worth to an external reference.

As a medium of exchange, stablecoins are considered more useful than more volatile cryptocurrencies.

Stablecoins may be linked to a currency, such as the U.S. dollar, or to the price of a commodity, such as gold. They pursue price stability by either maintaining reserve assets as collateral or by using algorithmic formulas to control supply. This approach ensures that the stablecoin's value remains relatively constant, making it a more dependable means of exchange compared to other, more volatile cryptocurrencies.

Market cap

Market capitalization, often referred to as "market cap", is a measure of the total value of a company's outstanding shares of stock.

It is calculated by multiplying the current market price of one share of the company's stock by the total number of outstanding shares.

Market cap is used to gauge a company's size and overall worth, as it reflects the perceived value of the company by the investing public.

It is a commonly used metric in financial analysis, and is often used to compare companies in the same industry or sector.

Layer 1

Layer 1 typically refers to the foundational network layer of a blockchain ecosystem, such as Bitcoin, Binance Chain, or Ethereum, and its underlying infrastructure.

Layer 2

Layer 2 refers to a secondary scaling solution that is built on top of a Layer 1 blockchain, such as Bitcoin or Ethereum, to enhance its scalability and transaction processing capabilities.

Layer 2 solutions are typically developed by third-party providers, and they operate alongside the main blockchain to provide additional processing capacity and reduce congestion.

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