Onchain finance, term by term
Short, plain-English definitions of the terms behind onchain ETFs, index tokens, yield vaults and token launches. Each one links to the deeper guides.
Atomic Transaction
A blockchain transaction where every step completes together or the entire operation reverts, leaving no partial state on the chain.
Auto-Compounding
Automatic reinvestment of yield back into a position by a vault, so value compounds through a rising share price with no manual claiming.
Basket Weights
The fixed proportions of each asset inside an index basket, defining what share of the basket's total value each component represents.
Concentrated Liquidity
An AMM design from Uniswap v3 where liquidity providers allocate capital to a chosen price range for greater depth and capital efficiency.
Creator Fee
A share of trading fees paid to whoever created a token, basket, or index, rewarding creation with ongoing revenue tied to trading activity.
Custody Address
The wallet address that holds ultimate ownership of an account, asset, or position, such as a Farcaster account or a vault's holdings.
DEX Routing / Aggregation
Splitting a trade across multiple DEXs and pools so each venue absorbs a smaller piece, improving the overall execution price.
DTF (Decentralized Token Folio)
Reserve Protocol's term for a governed onchain basket token whose holdings and parameters can be adjusted through tokenholder governance.
ERC-4626
The Ethereum tokenized vault standard: deposit an asset, receive ERC-20 shares whose redemption value grows as the vault earns yield.
Fair Launch
A token launch with no presale or insider allocation: everyone, including the team, buys from the same public pool on the same starting terms.
FDV (Fully Diluted Valuation)
Token price multiplied by maximum supply: what a project would be worth if every token existed today, in contrast to circulating market cap.
Immutable Contract
A smart contract whose code and parameters can never be changed after deployment: no admin key, no upgrades, no one who can alter the rules.
In-Kind Backing
A structure where a token is redeemable for the actual underlying assets held in a smart contract, rather than a promise or synthetic claim.
Index Token
A single ERC-20 token that represents a whole basket of crypto assets, giving diversified exposure in one tradable, transferable unit.
Liquid Staking Token (LST)
A tradable token like stETH or cbETH representing staked ETH plus accruing rewards, keeping staked capital liquid and usable across DeFi.
Liquidity Pool
A smart contract holding token reserves that traders swap against, with prices set by a formula instead of an order book.
LP Locking
Time-locking a liquidity pool position so the deployer cannot withdraw it before a set date, the standard onchain defense against rug pulls.
LP Position NFT
A non-fungible token representing a Uniswap v3 liquidity position, its price range, fee tier, and fees; the asset that gets locked in LP locks.
Minting
The creation of new token units by a smart contract, such as issuing new index or vault shares against deposited backing assets.
Non-Custodial
A design where you keep control of your own assets and no company or intermediary ever takes possession of them or can move them for you.
Onchain ETF
An informal term for a smart-contract token backed by a basket of assets that behaves like an ETF, but is not a regulated security.
Permissionless
A property of open systems where anyone can use or build without approval from a gatekeeper: no application, no whitelist, no account review.
Price Impact
How much your own trade moves a pool's price, determined by your trade size relative to the pool's liquidity depth.
Proof of Reserves
Evidence that an asset is fully backed by the reserves it claims, ranging from auditor snapshots to continuously verifiable onchain holdings.
Rebalancing
Adjusting a basket's composition or weights over time to match a target strategy; managed products rebalance, immutable baskets never do.
Redemption
Burning a basket or vault token to withdraw the underlying assets that back it, the mirror image of minting new shares.
Revenue-Share Staking
Staking a platform's native token to earn a proportional cut of the protocol's fee revenue, often paid in a stablecoin or major asset.
Rug Pull
An exit scam where token insiders drain the liquidity pool or dump holdings, crashing the price; mitigated by LP locking and immutable contracts.
Share Price / NAV
The value of one basket or vault share, calculated from the market value of the assets backing it divided by the number of shares outstanding.
Single-Sided Liquidity
Providing only one token to a pool, often via a concentrated price range where buyers supply the other side, the mechanic behind pump-style launches.
Slippage
The difference between the price you expect on a swap and the price you actually receive when the trade executes onchain.
Streaming Fee
A continuous management fee, quoted as an annual percentage, that accrues to an index or fund manager over time, often by diluting holders.
Token Launchpad
A platform that deploys a new token, creates its trading pool, and locks the liquidity in one automated flow, standardizing how tokens launch.
TVL (Total Value Locked)
The total dollar value of crypto assets deposited in a protocol's smart contracts, DeFi's standard measure of size and adoption.
Yield Vault
A smart contract that pools deposits, deploys them into a yield strategy, and mints share tokens whose value grows as the strategy earns.