Glossar

L

Liquidity

The ease with which a cryptocurrency can be bought or sold without significantly affecting its price.

Layer 1

The base blockchain protocol (e.g., Bitcoin, Ethereum) that handles core functionalities like transaction processing and security.

Layer 2

A secondary framework or protocol built on top of a Layer 1 blockchain to improve scalability and transaction speed (e.g., Lightning Network for Bitcoin).

Liquidity Pool

A collection of funds locked in a smart contract, used to facilitate trading on decentralized exchanges (DEXs).

Leverage

The use of borrowed funds to amplify potential returns (or losses) in cryptocurrency trading.

Liquidity Mining

A DeFi practice where users provide liquidity to a protocol in exchange for rewards, often in the form of governance tokens.

Lightning Network

A Layer 2 solution for Bitcoin that enables faster and cheaper transactions by processing them off-chain.

Layer 0

The foundational layer of a blockchain ecosystem, including the underlying infrastructure and protocols that support Layer 1 and Layer 2 solutions.

Liquidity Provider

An individual or entity that supplies funds to a liquidity pool on a decentralised exchange (DEX) to facilitate trading.