Short, plain definitions for the DEX and DeFi terms used across this site. Terms with a full dedicated explanation link out to the article that covers them in depth — this page gives the canonical short version rather than repeating that explanation in full.
Terms A–Z
- AMM (Automated Market Maker)
- A DEX model that prices and executes trades against a liquidity pool using an algorithm, rather than matching buyer and seller orders on a traditional order book. See how a DEX actually executes a trade for the full mechanism.
- CEX (Centralized Exchange)
- A crypto exchange that holds custody of user funds and matches trades on its own private, off-chain order book. See DEX vs. CEX for a full comparison.
- Gas fee
- The fee paid to a blockchain’s network to process a transaction, including a DEX trade. Gas fees vary with network congestion and are separate from any trading fee a DEX or liquidity pool charges.
- Impermanent loss
- The reduced value a liquidity provider can experience when the relative price of two pooled tokens shifts significantly after depositing, compared to simply holding both tokens separately. See how a DEX actually executes a trade for more on liquidity provider mechanics.
- Liquidity pool
- A smart contract holding reserves of two (or more) tokens, supplied by liquidity providers, that an AMM-based DEX trades against instead of matching individual buy and sell orders.
- Non-custodial wallet
- A crypto wallet where the user, not a company, controls the private keys and therefore the funds. Connecting one is a required step to use a DEX. See DEX wallet security for the security habits that matter once it’s connected.
- Slippage
- The difference between a trade’s expected price and its actual executed price, caused by the trade itself shifting a liquidity pool’s reserve ratio. Larger trades against smaller pools produce more slippage.
- Token approval
- On-chain permission granted to a smart contract allowing it to move a specific token out of a connected wallet, up to an approved amount. See DEX wallet security for why unlimited approvals carry ongoing risk.