Taxonomy

Stablecoins

Cryptocurrencies often experience sharper price fluctuations than fiat, which isn't a good quality for people who want to know how much their money will be worth a week from now. Stablecoins peg cryptocurrencies to non-crypto currencies, such as the U.S. dollar, in order to keep the price under control. As the name implies, stable-coins aim to bring price "stability."

Yield Farming

Yield farming is a practice in the DeFi cryptocurrency world. It is the term that defines the process that stands for obtaining the highest yield and a method to earn more cryptocurrency with your cryptocurrency. In addition, it’s a chance to obtain extra yields from the protocol’s governance token.

DEX

DEXs facilitate peer-to-peer trading by relying on automated smart contracts to execute trades without an intermediary, relying instead on self-executing smart contracts to facilitate trading. This dynamic enables instantaneous trades, often at a lower cost than on centralized crypto exchanges. DEXs allow crypto investors to hold their keys while trading by using liquidity solutions from order books to liquidity pools.

Protocols

Protocols are basic sets of rules that allow data to be shared between computers. For cryptocurrencies, they establish the structure of the blockchain — the distributed database that allows digital money to be securely exchanged on the internet.

APR

Financial institutions often tout their credit products using APR since it seems like borrowers end up paying less in the long run for accounts like loans, mortgages, and credit cards.

APR does not take into account the compounding of interest within a specific year. It is calculated by multiplying the periodic interest rate by the number of periods in a year in which the periodic rate is applied. It does not indicate how many times the rate is applied to the balance.

APR is calculated as follows:

APR = Periodic Rate x Number of Periods in a Year

APY

Investment companies generally advertise the APY they pay to attract investors because it seems like they'll earn more on things like savings accounts. Unlike APR, APY does take into account the frequency with which the interest is applied—the effects of intra-year compounding. This seemingly subtle difference can have important implications for investors and borrowers. APY is calculated by adding 1 to the periodic rate as a decimal and multiplying it by the number of times equal to the number of periods that the rate is applied.

Here's how APY is calculated:

APY = (1 + Periodic Rate)^Number of periods

APR vs. APY Example

A loan company might charge 2% interest each month for a product. Therefore, the APR equals 24% (2% x 12 months = 24%). This differs from APY, which takes into account compound interest.

The APY for a 2% rate of interest compounded monthly would be 12.68% [(1 + 0.02)^12] = 26.82% a year. If you only carry a balance on your credit card for one month's period, you will be charged the equivalent yearly rate of 12%. However, if you carry that balance for the year, your effective interest rate becomes 12.68% as a result of compounding each month.

Compound Interest

Compound interest is the interest on a deposit calculated based on both the initial principal and the accumulated interest from previous periods. Compound interest can be thought of as "interest on interest," and will make a sum grow at a faster rate than simple interest, which is calculated only on the principal amount.

Wallet

A cryptocurrency wallet is a device, physical medium, program, or service which stores the public and/or private keys for cryptocurrency transactions. In addition to this basic function of storing the keys, a cryptocurrency wallet more often also offers the functionality of encrypting and/or signing information.

MetaMask is a software cryptocurrency wallet used to interact with the Ethereum blockchain. It allows users to access their Ethereum wallet through a browser extension or mobile app, which can then be used to interact with decentralized applications.

Vaults

Epsylon Vaults, in essence, are pools of funds with an associated strategy for maximizing returns on the asset in the vault. Vault strategies are more active than just lending out coins like in the standard Epsylon protocol. In fact, most vault strategies can do multiple things to maximize the returns. This can involve supplying collateral and borrowing other assets such as stable coins, providing liquidity and collecting trading fees, or farming other tokens and selling them for profit.

Representing an advanced approach to yield farming, Epsylon Vaults are a better solution for the long-term storage of crypto assets. They integrate complex strategies and connect to the most profitable protocols for maximizing depositors’ revenue.