Key Terms and Concepts in NFTY Finance, NFTs, and DeFi

To help you navigate the world of NFTY Finance, NFTs, and DeFi, we've compiled a glossary of essential terms and concepts you'll encounter throughout your journey.

Borrower

The individual or entity that receives a loan and is obligated to repay the principal amount plus interest.

Collateral

An asset pledged by a borrower to secure a loan, which can be seized by the lender if the borrower defaults on their repayment obligations.

Decentralized Finance (DeFi)

An alternative financial system built on blockchain technology that enables users to access financial services without intermediaries, such as banks or payment processors.

Governance Token

A token that grants its holders the right to participate in the decision-making process of a DeFi platform, such as voting on protocol upgrades or changes to platform parameters.

Immutable NFTs

Digital assets that are stored on blockchain networks that cannot be altered, providing verifiable ownership and provenance.

Interest Rate

The percentage of the loan amount charged by the lender to the borrower for the privilege of borrowing, typically expressed as an annual percentage rate (APR).

Lender

The individual or entity that provides a loan and receives interest in return, assuming the risk associated with the borrower's ability to repay the loan.

Liquidation

The process of selling a borrower's collateral to recover the outstanding loan amount in the event of a default or failure to maintain the required LTV.

Loan-to-Value Ratio (LTV)

The ratio of the loan amount to the value of the collateral, expressed as a percentage. It is used to assess the risk associated with a loan.

Non-Fungible Tokens (NFTs)

Unique digital assets that represent ownership of a specific item, such as artwork, collectibles, or virtual real estate. Each NFT is backed by blockchain technology, ensuring its authenticity and provenance.

Smart Contracts

Self-executing contracts with the terms of the agreement directly written into code, allowing for trustless and decentralized transactions on the blockchain.

Soulbound Tokens

Digital assets that are permanently bound to a specific user or account, often used in gaming to represent unique and non-transferable items or characters.

Total Value Locked (TVL)

A metric used to measure the amount of assets staked or deposited in a DeFi platform, often used as an indicator of the platform's popularity and growth.