> For the complete documentation index, see [llms.txt](https://web3-encyclopedia.gitbook.io/web3-encyclopedia/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://web3-encyclopedia.gitbook.io/web3-encyclopedia/decentralized-finance-defi/tl-dr.md).

# TL;DR 👀

<mark style="color:purple;">**CEX vs DEX**</mark>&#x20;

<mark style="color:purple;">Centralized exchanges (CEXs) are platforms that allow users to buy and sell cryptocurrencies, operating as trustworthy brokers and custodians, keeping and safeguarding your cash</mark>

<mark style="color:purple;">Decentralized exchanges (DEXs) are an alternative to traditional centralized exchanges in which no single entity is in charge of the assets; instead, smart contracts and decentralized apps are used to automate transactions and trades</mark>

<mark style="color:purple;">**CeFi vs DeFi**</mark>

<mark style="color:purple;">Centralized finance (CeFi) enacts traditional financial services that are facilitated by centralized authorities, whereas decentralized finance (DeFi) operates on a trustless network that's enforced through smart contract technology</mark>

<mark style="color:purple;">**Algorithmic Stablecoins**</mark>

<mark style="color:purple;">Algorithmic stablecoins are a form of stablecoin that is backed by an on-chain algorithm that facilitates a change in supply and demand between them (the stablecoin) and another cryptocurrency that props them up</mark>

<mark style="color:purple;">**Airdrop**</mark>&#x20;

<mark style="color:purple;">An airdrop, as it pertains to cryptocurrency, is a marketing stunt that involves sending coins or tokens to wallet addresses in order to promote awareness of a new virtual currency</mark>

<mark style="color:purple;">**Liquidity Pool**</mark>&#x20;

<mark style="color:purple;">Liquidity pools are a collection of tokens or digital assets locked in a smart contract that provide essential liquidity to decentralized exchanges.</mark>

<mark style="color:purple;">**Impermanent Loss**</mark>&#x20;

<mark style="color:purple;">Impermanent loss is when the price of assets locked up in a liquidity pool changes after being deposited and creates an unrealized loss (in dollar terms) versus if the liquidity provider had simply held the assets in a crypto wallet</mark>

<mark style="color:purple;">**Swapping**</mark>&#x20;

<mark style="color:purple;">Swapping is an automated mechanism in DeFi for transferring assets by exchanging their existing tokens for new ones</mark>

<mark style="color:purple;">**Wrapped Token**</mark>&#x20;

<mark style="color:purple;">Wrapped tokens are assets that allow the value of a native asset from one blockchain to transfer to another blockchain</mark>

<mark style="color:purple;">**Arbitrage Opportunities**</mark>&#x20;

<mark style="color:purple;">Crypto arbitrage exploits temporary inefficiencies in asset prices during short intervals when a currency is available at different prices at the same time</mark>

<mark style="color:purple;">The currency is bought on the exchange where the price is lower and sold on exchanges where the price is higher to generate a profit.</mark>

<mark style="color:purple;">**Staking**</mark>&#x20;

<mark style="color:purple;">Staking is the process of locking crypto assets into a smart contract in exchange for rewards and generating passive income</mark>

<mark style="color:purple;">**Yield Farming**</mark>

<mark style="color:purple;">Yield farming is a passive income opportunity in which participants, known as liquidity providers, provide liquidity to cryptocurrency exchanges in exchange for rewards generated by transaction fees on a decentralized exhange</mark>

<mark style="color:purple;">**Total Value Locked (TVL)**</mark>&#x20;

<mark style="color:purple;">Total value locked (TVL) is the amount of user funds deposited in a decentralized finance (DeFi) protocol</mark>&#x20;

<mark style="color:purple;">These funds could be vested in the project for several functions, such as staking, liquidity pools</mark> <mark style="color:purple;">or lending</mark>

<mark style="color:purple;">**Gas Fee**</mark>

<mark style="color:purple;">Gas fees are the charges levied by developers to process transactions on a blockchain –– where the vast majority of DeFi transactions happen</mark>

<mark style="color:purple;">**Lending & Borrowing**</mark>&#x20;

<mark style="color:purple;">DeFi lending and borrowing offers innovations in efficiency, access and transparency compared to CeFi</mark>&#x20;

<mark style="color:purple;">Lenders provide borrowers with funds with the expectation that the borrowed amount is paid back with additional interest for providing immediate access to funds</mark>

<img src="/files/AUZcMSlcv8WVu44BBAml" alt="" data-size="line">

<details>

<summary><mark style="color:yellow;">References</mark></summary>

[<mark style="color:purple;">**https://www.youtube.com/watch?v=xKjR9c9P0UY**</mark>](https://www.youtube.com/watch?v=xKjR9c9P0UY)

[<mark style="color:purple;">https://www.zenledger.io/blog/decentralized-exchange-vs-centralized-exchange</mark>](https://www.zenledger.io/blog/decentralized-exchange-vs-centralized-exchange)

[<mark style="color:purple;">https://www.coingecko.com/en/exchanges/decentralized</mark>](https://www.coingecko.com/en/exchanges/decentralized)

[<mark style="color:purple;">https://coinmarketcap.com/rankings/exchanges/dex/</mark>](https://coinmarketcap.com/rankings/exchanges/dex/)

[<mark style="color:purple;">https://www.leewayhertz.com/defi-vs-cefi</mark>](https://www.leewayhertz.com/defi-vs-cefi)

<mark style="color:purple;"><https://www.99bitcoins.com></mark>

[<mark style="color:purple;">https://www.coindesk.com/learn/algorithmic-stablecoins-what-they-are-and-how-they-can-go-terribly-wrong/</mark>](https://www.coindesk.com/learn/algorithmic-stablecoins-what-they-are-and-how-they-can-go-terribly-wrong/)

[<mark style="color:purple;">https://www.investopedia.com/terms/a/airdrop-cryptocurrency.asp</mark>](https://www.investopedia.com/terms/a/airdrop-cryptocurrency.asp)

[<mark style="color:purple;">https://cryptoscripts.medium.com/liquidity-pools-what-are-they-14e585315376</mark>](https://cryptoscripts.medium.com/liquidity-pools-what-are-they-14e585315376)

[<mark style="color:purple;">https://www.coindesk.com/learn/what-are-liquidity-pools/</mark>](https://www.coindesk.com/learn/what-are-liquidity-pools/)

[<mark style="color:purple;">https://www.youtube.com/watch?v=8XJ1MSTEuU0https://www.coindesk.com/learn/2021/07/13/defi-lending-3-major-risks-to-know/</mark>](https://www.youtube.com/watch?v=8XJ1MSTEuU0https://www.coindesk.com/learn/2021/07/13/defi-lending-3-major-risks-to-know/)

[<mark style="color:purple;">https://www.youtube.com/watch?v=8XJ1MSTEuU0https://www.coindesk.com/learn/2021/07/13/defi-lending-3-major-risks-to-know/</mark>](https://www.youtube.com/watch?v=8XJ1MSTEuU0https://www.coindesk.com/learn/2021/07/13/defi-lending-3-major-risks-to-know/)

[<mark style="color:purple;">https://cryptomarketpool.com/how-to-swap-tokens-on-uniswap-using-a-smart-contract</mark>](https://cryptomarketpool.com/how-to-swap-tokens-on-uniswap-using-a-smart-contract)

[<mark style="color:purple;">https:/www.forbesindia.com/article/crypto-made-easy/staking-swapping-farming-all-you-need-to-know-about-defi-concepts/</mark>](https:/www.forbesindia.com/article/crypto-made-easy/staking-swapping-farming-all-you-need-to-know-about-defi-concepts/)

[<mark style="color:purple;">https:/academy.shrimpy.io/post/how-to-swap-tokens-a-guide-to-trading-in-defi</mark>](https:/academy.shrimpy.io/post/how-to-swap-tokens-a-guide-to-trading-in-defi)

[<mark style="color:purple;">https://finage.co.uk/blog/defi-arbitrage-bot-overview</mark>](https://finage.co.uk/blog/defi-arbitrage-bot-overviewhttps:)

[<mark style="color:purple;">https://en.cryptonomist.ch/2022/06/17/arbitrage-opportunities-defi/</mark>](https://en.cryptonomist.ch/2022/06/17/arbitrage-opportunities-defi/)

<mark style="color:purple;"><https://www.prolitus.com/defi-staking-platform-development/></mark>

[<mark style="color:purple;">https://cointelegraph.com/defi-101/defi-staking-a-beginners-guide-to-proof-of-stake-pos-coins</mark>
](https://cointelegraph.com/defi-101/defi-staking-a-beginners-guide-to-proof-of-stake-pos-coins)

[<mark style="color:purple;">https://aivia.io/blog/en/what-is-yield-farming/</mark>](https://aivia.io/blog/en/what-is-yield-farming/)

[<mark style="color:purple;">https://www.businessinsider.com/personal-finance/yield-farming#:\~:text=Yield%20farming%20involves%20lending%20or,farming%20is%20also%20incredibly%20risky</mark>](https://www.businessinsider.com/personal-finance/yield-farming#:~:text=Yield%20farming%20involves%20lending%20or,farming%20is%20also%20incredibly%20risky.)

[<mark style="color:purple;">https://cointelegraph.com/news/total-value-locked-in-defi-marks-new-all-time-high-close-to-40b</mark>](https://cointelegraph.com/news/total-value-locked-in-defi-marks-new-all-time-high-close-to-40b)

[<mark style="color:purple;">https://www.cnbctv18.com/cryptocurrency/explained--total-value-locked-what-is-it-and-why-does-it-matter-13743222.htm#:\~:text=What%20is%20Total%20Valued%20Locked,%2C%20liquidity%20pools%2C%20or%20lending.</mark>](https://www.cnbctv18.com/cryptocurrency/explained--total-value-locked-what-is-it-and-why-does-it-matter-13743222.htm#:~:text=What%20is%20Total%20Valued%20Locked,%2C%20liquidity%20pools%2C%20or%20lending.)

[<mark style="color:purple;">https://finematics.com/lending-and-borrowing-in-defi-explained/</mark>](https://finematics.com/lending-and-borrowing-in-defi-explained/)

[<mark style="color:purple;">https://www.futurelearn.com/courses/defi-exploring-decentralised-finance-with-blockchain-technologies</mark>](https://www.futurelearn.com/courses/defi-exploring-decentralised-finance-with-blockchain-technologies)

</details>


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