Glossary of Liquid Staking Terms
This glossary provides definitions for key terms related to liquid staking, DeFi, and the Kofi Finance ecosystem. Understanding these terms will help you navigate the liquid staking landscape more confidently.
Liquid Staking Fundamentals
APR (Annual Percentage Rate)
The annualized rate of return on an investment, not accounting for the effect of compounding. In staking, this represents the yearly percentage yield if rewards were not reinvested.
APY (Annual Percentage Yield)
The annualized rate of return on an investment, accounting for the effect of compounding. This is typically higher than APR and represents the actual expected yearly return with reinvested rewards.
Consensus Mechanism
The process by which a blockchain network reaches agreement on the state of the ledger. Proof of Stake (PoS) is a type of consensus mechanism where validators are selected to create new blocks based on the amount of cryptocurrency they have staked.
Delegation
The process of assigning your tokens to a validator to participate in staking without running a node yourself. The validator performs the consensus duties while you share in the rewards.
Liquid Staking
A staking method that issues transferable tokens representing staked assets, allowing users to maintain liquidity while still earning staking rewards.
Liquid Staking Derivative (LSD)
A token that represents a staked position in a proof-of-stake network. These tokens can be transferred, traded, or used in DeFi while the underlying assets remain staked.
Liquid Staking Protocol
A platform that enables users to stake their tokens and receive liquid staking tokens in return, managing the staking process on behalf of users.
Proof of Stake (PoS)
A consensus mechanism where validators are selected to create new blocks based on the amount of cryptocurrency they have staked, rather than solving complex mathematical puzzles (as in Proof of Work).
Slashing
A penalty imposed on validators for malicious behavior or failure to maintain proper operation. Slashing typically results in the loss of a portion of the staked tokens.
Staking
The process of locking up cryptocurrency to support a blockchain network's operations and security in exchange for rewards.
Staking Rewards
The compensation received for participating in staking, typically in the form of additional tokens. Rewards are generated from transaction fees and/or token inflation.
Validator
A node in a proof-of-stake network responsible for validating transactions and creating new blocks. Validators stake tokens as collateral to ensure honest behavior.
Kofi Finance Specific Terms
kAPT
Kofi's liquid staking token that represents staked APT on a 1:1 basis. kAPT can be redeemed for the underlying APT and is designed to maintain a stable peg. Unlike stkAPT, kAPT does not accrue staking rewards, making it ideal for applications requiring a stable value.
stkAPT
"Staked kAPT" - Kofi's yield-bearing token that accrues staking rewards plus additional boosted yields. The value of stkAPT relative to kAPT increases over time as rewards accumulate, making it ideal for users seeking passive yield growth.
Boosted Yields
Additional rewards provided on top of the base staking rewards, unique to Kofi's stkAPT token. These boosted yields are generated through various yield-capturing mechanisms.
Kofi Points
A rewards program that allows users to earn points for various activities within the Kofi ecosystem, which may translate to future benefits during Kofi's token generation event.
Exchange Rate
The ratio at which one token can be exchanged for another. In Kofi, this refers to the value relationship between kAPT, stkAPT, and the underlying APT.
DeFi Concepts
Automated Market Maker (AMM)
A type of decentralized exchange protocol that uses liquidity pools and a mathematical formula to price assets, rather than an order book.
Collateral
Assets deposited as security for a loan or other obligation. In DeFi, liquid staking tokens can often be used as collateral.
Decentralized Exchange (DEX)
A platform that enables peer-to-peer trading of cryptocurrencies without a central authority or intermediary.
Decentralized Finance (DeFi)
A blockchain-based form of finance that doesn't rely on central financial intermediaries such as banks or brokerages to offer financial instruments.
Impermanent Loss
The temporary loss of funds experienced by liquidity providers due to price volatility in a trading pair. It represents the difference between holding assets versus providing liquidity with them.
Liquidity Pool
A collection of funds locked in a smart contract, used to facilitate trading by providing liquidity to a market.
Liquidity Provider (LP)
An individual or entity that contributes assets to a liquidity pool in exchange for rewards, typically in the form of trading fees or incentive tokens.
Money Market
A DeFi protocol that allows users to lend and borrow cryptocurrencies, often using liquid staking tokens as collateral.
Smart Contract
Self-executing code deployed on a blockchain that automatically implements the terms of an agreement when predetermined conditions are met.
Total Value Locked (TVL)
The total value of cryptocurrency assets deposited in a DeFi protocol. This metric is often used to measure the size and adoption of a protocol.
Yield Farming
The practice of moving cryptocurrency assets between different DeFi protocols to maximize returns, often involving multiple strategies and tokens.
Technical Terms
Blockchain
A distributed ledger technology that records transactions across multiple computers in a way that ensures security, transparency, and immutability.
Gas Fees
The cost to perform a transaction or execute a smart contract on a blockchain network, paid to validators or miners who process the transaction.
Governance
The system by which decisions are made in a protocol, often involving voting by token holders on proposals for changes or improvements.
Oracle
A service that provides external data to a blockchain, allowing smart contracts to access information from outside the blockchain environment.
Protocol
A set of rules and procedures that govern how a system operates. In blockchain, protocols define how transactions are validated and recorded.
Token Standard
A set of rules that tokens on a blockchain must follow to ensure compatibility with wallets, exchanges, and other applications. Examples include ERC-20 on Ethereum or ARC-20 on Aptos.
Wallet
A digital tool that allows users to store, send, and receive cryptocurrencies. Wallets can be hardware devices, software applications, or web-based services.
Risk-Related Terms
Depeg
When a token designed to maintain a specific value relationship with another asset deviates from that intended peg due to market conditions or other factors.
Exploit
A vulnerability in a smart contract or protocol that can be used to perform unintended actions, potentially resulting in loss of funds.
Rugpull
A type of exit scam where developers abandon a project and withdraw all the project's liquidity, leaving investors with worthless tokens.
Smart Contract Risk
The potential for loss due to bugs, vulnerabilities, or unintended behaviors in the code of a smart contract.
Slashing Risk
The risk that validators will be penalized (slashed) for malicious behavior or operational failures, potentially affecting the value of staked assets.
Understanding these terms will help you navigate the liquid staking ecosystem more confidently. If you encounter terms not included in this glossary, don't hesitate to ask in the Kofi Finance community channels.
This glossary is currently under development. A comprehensive list of terms and definitions will be available soon.