Capital Efficiency: Typically defined as "capital efficiency is the ratio of how much a company is spending on growing revenue and how much they're getting in return." Otherwise known as 'Return on Capital Employed (ROCE)'. However, in crypto, defi, and more specifically, as it relates to liquidity pools and/or AMMs, I would argue that capital efficiency is more accurately defined as:
- The ratio of how much a person or entity is deploying in liquidity vs. how much return is being generated (very similar to the above definition);
- The percentage of capital which is sitting idle in a pool, not providing any liquidity to a trading pair or to the capital markets more broadly due to the fact that no one is trading at the given price.
Collateral:
Value that is put at risk (being locked in a smart contract) of being kept, liquidated, or taken from the original owner if there is a default on a loan or other financial instrument
Derivatives:
An asset or security that derives its value from another asset. Examples include:
1. stETH - which is wrapped staked ETH, which allows users to wrap their assets as a 1:1 peg with the underlying asset (the underlying asset being the staked ETH of course.
2. Any 'Synthetix' token such as sUSD, iCOMP or others.
Farming:\
Margin:
Funds you can borrow, above and beyond the capital you actually own or have in a particular account.
Margin Call:
The act of a broker, exchange, smart contract, or other entity, "calling" (e.g. asking or requiring) for additional funds in order for the account holder to stay within the account's requirements. These requirements are usually called "maintenance margin."
Maintenance Margin:
The minimum amount of equity (the value that they originally contributed and own outright) that an investor must maintain in a margin account after an investment has been made with any margin funds.
Liquidation Event:\
Liquidity Pool:\
Liquidity Mining:\
Synthetic Assets:\
Wrapped Assets:\