A liquidity pool is a collection of funds locked in a smart contract that allows users to trade cryptocurrencies or tokens automatically. Instead of relying on a traditional buyer and seller, these pools use algorithms to set prices and enable instant transactions. Liquidity pools are an important part of decentralised finance, making it easier for…
Impermanent loss is a temporary reduction in the value of funds provided to a decentralised finance (DeFi) liquidity pool, compared to simply holding the assets in a wallet. This happens when the prices of the pooled tokens change after you deposit them. The bigger the price shift, the larger the impermanent loss. If the token…
A Centralised Exchange (CEX) is an online platform where people can buy, sell, or trade cryptocurrencies using a central authority or company to manage transactions. These exchanges handle all user funds and transactions, providing an easy way to access digital assets. Users typically create an account, deposit funds, and trade through the exchange’s website or…
A Decentralised Exchange, often called a DEX, is a platform that allows people to trade cryptocurrencies directly with each other without using a central authority or intermediary. Instead of relying on a company or organisation to manage trades, DEXs use smart contracts and blockchain technology to automate transactions. This means users have control over their…
Chain reorganisation is a process that occurs in blockchain networks when two versions of the transaction history temporarily exist and the network must decide which one to continue building upon. This usually happens when miners find blocks at nearly the same time, creating competing chains. The network resolves this by choosing the longest valid chain,…
A cross-chain bridge is a technology that allows digital assets or data to move between different blockchain networks. It acts as a link, enabling users to transfer tokens or information from one blockchain to another without needing a central authority. This helps blockchains interact and work together, making it easier for users to access a…
A hot wallet is a digital wallet that is connected to the internet, allowing quick and easy access to cryptocurrencies or digital assets. It is convenient for frequent transactions, but it is more vulnerable to hacking because it stays online. A cold wallet, in contrast, keeps digital assets offline, usually using hardware devices or paper,…
A wallet seed phrase is a set of words, typically 12 or 24, used to create and recover a cryptocurrency wallet. This phrase acts as the master key that can restore access to all the funds and accounts within the wallet, even if the device is lost or damaged. Keeping the seed phrase safe and…
Gas fees are payments made by users to cover the computing power required to process and validate transactions on a blockchain network. These fees help prevent spam and ensure the network runs smoothly by rewarding those who support the system with their resources. The amount of gas fee can vary depending on network activity and…
Layer 2 scaling refers to technologies built on top of existing blockchains, such as Ethereum, to make them faster and cheaper to use. These solutions handle transactions off the main blockchain, then report back with a summary, reducing congestion and costs. This approach helps blockchains support more users and activity without changing the core system.