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If you own or have traded cryptocurrency before, but never used a decentralized exchange, staked in a pool, yield farmed, or tried any of the other services DeFi has to offer, this guide is for you. These are some of the most important concepts to understand to take advantage of the financial opportunities in DeFi.
DeFi: Short for "decentralized finance", a catch-all term for financial services that are provided on public blockchains by leveraging smart contracts, including swapping tokens, adding liquidity, staking in pools, yield farming, and more.
ApeSwap is a DeFi Hub.
Decentralized Exchange (DEX): A protocol that uses smart contracts to allow users to swap between crypto tokens without a centralized intermediary.
ApeSwap's core product is a DEX.
Automated Market Maker (AMM): An automated market maker is a type of DEX that uses a mathematical formula to price assets, rather than using an order book model of bids (buyers) and asks (sellers) typical in traditional finance on centralized exchanges.
ApeSwap's AMM uses the constant product formula (initially invented by UniSwap) to price assets on the DEX and facilitate swapping
Swap: To trade some amount of one token for an equivalent amount of another token.
ApeSwap's DEX allows you to swap tokens on BNB Chain, the Polygon blockchain, or the Ethereum blockchain.
Liquidity: The extent to which an asset is available to be bought or sold. In the context of a DEX, the amount of crypto tokens that can be traded for one another.
ApeSwap's DEX currently offers liquidity for ~200 tokens.
Liquidity Pool: A combination of two crypto assets in a smart contract that allows a decentralized exchange to facilitate trading between the two tokens.
ApeSwap offers users the ability to create liquidity pools of token pairs that are native to three blockchains: BNB Chain, Polygon, or Ethereum.
Liquidity Provider: Someone who adds liquidity to a protocol by supplying (generally equal) amounts of two crypto tokens to a liquidity pool.
Users can become liquidity providers using ApeSwap's DEX.
LP Token: Short for "liquidity provider token," a new token that is created and granted to a liquidity provider as a "receipt" of the liquidity that they added to a liquidity pool.
Users that contribute to a liquidity pool on ApeSwap's DEX are granted APE-LPs - ApeSwap's native LP tokens.
Concentrated Liquidity: Liquidity that's specific to a certain price range. When the relative price between the two tokens that make up a concentrated liquidity pair is within the price range set by the liquidity provider, that liquidity will be used to facilitate trades between that pair and can earn rewards.
Staking: The act of depositing crypto tokens that you own into a protocol or smart contract to earn rewards.
ApeSwap provides users the ability to stake BANANA and GNANA in Staking Pools or APE-LPs in Yield Farms.
Staking Pool: A product which allows users to stake one type of token to earn either more of the same token, or other tokens. Staking Pools can be expressed in the following format: "Stake [token type], Earn [token type]."
ApeSwap offers over 50 Staking Pools, including a Stake BANANA, Earn BANANA Staking Pool. Users who stake their BANANA into this Staking Pool earn additional BANANA as a reward.
Yield Farm: A product that allows users to stake LP tokens to earn tokens as a reward. Yield Farms incentivize users to add liquidity to a DEX so that the DEX can continue to facilitate token swaps between the two tokens in the liquidity pool.
ApeSwap offers over 100 Yield Farms that reward users with BANANA for staking their APE-LP tokens.
Maximizer: A product that allows users to stake single assets or LP tokens to earn tokens as a reward, but instead of rewards accumulating and having to be manually compounded, a Maximizer auto-compounds the earned rewards to purchase more of the input asset
APR (Annual Percentage Rate): The rate of return on staked assets, exclusive of the effects of compounding. These are subject to change based on a number of different factors.
ApeSwap lists rates of return for Staking Pools and Yield Farms in terms of APR.
APY (Annual Percentage Yield): The rate of return on staked assets including the effects of compounding.
ApeSwap's APY calculations assume daily compounding, e.g., that earned reward tokens are re-staked back into a Staking Pool or Yield Farm once per day.
Last modified 4mo ago