This article was first published on NEM
The Staking & DeFi glossary with StakeHound is part of NEM’s next step into DeFi as we continue to strengthen our network and look to increase accessibility to the XEM token.
If you would like to suggest other terms to be added to our glossary, please submit them through our NEM Hub open task.
Decentralized finance (often called DeFi or open finance) refers to the economic paradigm shift enabled by decentralized technologies, particularly blockchain networks. DeFi represents a shift from a centralized and closed financial system to a universally accessible economy that is based on open protocols that are interoperable, programmable, and composable.
Institution or party who holds the asset. In the case of stakedXEM, this role is played by Copper, which is based in the UK and regulated by the FSA. Custodians such as Copper hold the keys to mint tokens.
The availability of liquid assets to a company or market. An asset is considered more liquid if it can easily be converted into cash. The harder the ability to turn an asset into cash the more illiquid the asset. For example, stocks are considered relatively liquid assets as they can be easily converted to cash while real estate is considered an illiquid asset. The liquidity of an asset affects its risk potential and market price.
Proof of Stake
An alternative consensus protocol, in which an individual or "validator" uses their own cryptocurrency to validate transactions or blocks. Validators "stake" their cryptocurrency, such as ether, on whichever transactions they choose to validate. If the individual validates a block (group of transactions) correctly then the individual receives a reward. Typically, if a validator verifies an incorrect transaction then they lose the cryptocurrency that they staked. Proof of Stake requires a less amount of computing power compared ...
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