Crypto Loan Glossary & Knowledge Base
72 terms across DeFi and CeFi lending — from LTV and liquidation to smart contracts and tax efficiency — explained in plain English with real examples.
72 terms 5 categories Updated March 2026
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A
Altcoin Loan Basics
Any cryptocurrency other than Bitcoin — ETH, SOL, ADA, and others can be used as loan collateral.
AML (Anti-Money Laundering) Tax & Legal
Regulations requiring platforms to verify user identities and monitor transactions for illegal activity.
APR (Annual Percentage Rate) Loan Basics
The yearly interest rate you pay on a crypto loan, not including compounding effects.
APY (Annual Percentage Yield) Loan Basics
The effective annual rate including compounding — always higher than APR for the same nominal rate.
B
C
Capital Gains Tax & Legal
Profit from selling an asset — avoided by borrowing against crypto instead of selling it.
CeFi (Centralized Finance) CeFi
Crypto lending through centralized companies like Nexo and Ledn — with KYC, customer support, and custodial services.
Cold Storage CeFi
Storing crypto offline in hardware wallets — the most secure way to hold assets long-term.
Collateral Loan Basics
Assets you deposit to secure a crypto loan. If you can't repay, the lender keeps the collateral.
Collateral Factor DeFi
The maximum percentage of your deposited asset's value that you can borrow in DeFi protocols.
Cost Basis Tax & Legal
The original purchase price of your crypto — used to calculate capital gains when you sell or get liquidated.
Counterparty Risk Risk & Safety
The risk that the platform holding your crypto becomes insolvent, gets hacked, or freezes withdrawals.
Credit Line CeFi
A pre-approved borrowing limit based on your deposited collateral — draw funds as needed.
Crypto Wallet Loan Basics
Software or hardware that stores your private keys and lets you interact with DeFi lending protocols.
Crypto-Backed Loan Loan Basics
A loan where cryptocurrency serves as collateral — you borrow cash without selling your crypto.
Custodian CeFi
The entity that holds and secures your crypto collateral while your loan is active.
D
DAI DeFi
A decentralized, crypto-overcollateralized stablecoin created by MakerDAO — pegged to $1 USD.
DApp (Decentralized Application) DeFi
A blockchain-based app you interact with through your wallet — Aave, Compound, and MakerDAO are all DApps.
De-peg Risk Risk & Safety
The risk that a stablecoin loses its $1 peg — which can cascade into liquidations across DeFi.
DeFi (Decentralized Finance) DeFi
Financial services built on blockchain smart contracts — no banks, no KYC, no intermediaries.
Disbursement Loan Basics
How and when you receive your loan funds after depositing collateral.
E
F
Fiat Currency Loan Basics
Government-issued money like USD, EUR, or GBP — what many crypto loans are disbursed in.
Fixed-Term Loan Loan Basics
A loan with a set repayment date — typically 3, 6, or 12 months. Ledn and Unchained use this model.
Flash Loan DeFi
An uncollateralized loan that must be borrowed and repaid within a single blockchain transaction.
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H
Health Factor DeFi
A numerical score in Aave that shows how safe your position is. Below 1 = eligible for liquidation.
HODL Loan Basics
Crypto slang for holding your assets long-term — crypto loans let you HODL while still accessing cash.
Hot Wallet CeFi
An internet-connected wallet used for day-to-day transactions — faster but more vulnerable to hacking.
I
Impermanent Loss Risk & Safety
A loss that liquidity providers face when token prices change — relevant if you're farming yield with borrowed funds.
Insurance CeFi
Protection against loss from hacks, theft, or platform failure — not all crypto lenders offer it.
Interest Rate Loan Basics
The cost of borrowing, expressed as a percentage. Can be fixed or variable depending on the platform.
K
L
Layer 2 DeFi
Scaling networks built on top of Ethereum — offering cheaper, faster DeFi transactions.
Leverage Risk & Safety
Using borrowed funds to amplify your position — higher potential gains but also higher liquidation risk.
Liquidation Risk & Safety
When a platform sells your collateral because its value dropped below the required threshold.
Liquidation Penalty Risk & Safety
An extra fee charged when your position gets liquidated — on top of losing your collateral.
Liquidation Threshold Risk & Safety
The maximum LTV percentage at which your collateral gets liquidated — cross this line and you lose it.
Liquidity Pool DeFi
A pool of tokens locked in a smart contract that provides the funds for DeFi borrowing.
Loyalty Tier CeFi
Rate reduction programs based on holding a platform's native token (e.g., NEXO token for lower APR).
LTV (Loan-to-Value) Loan Basics
The ratio of your loan amount to the value of your deposited collateral. Lower LTV = safer.
M
Margin Call Risk & Safety
A warning from your lender that your collateral value is approaching the liquidation threshold.
Minimum Loan Amount Loan Basics
The smallest loan a platform will issue — ranges from $50 (Nexo) to $10,000 (Unchained).
Multisig (Multi-Signature) CeFi
A security setup requiring multiple private keys to authorize a transaction — used by Unchained.
O
Open-Ended Loan Loan Basics
A loan with no fixed repayment date — you repay whenever you want, paying interest as you go.
Oracle DeFi
A service that feeds real-world price data to smart contracts — critical for calculating LTV and liquidations.
Overcollateralization Risk & Safety
Depositing more collateral value than the amount you borrow — the fundamental safety mechanism.
P
Principal Loan Basics
The original amount you borrowed — the base on which interest is calculated.
Private Key Risk & Safety
The cryptographic password that controls your crypto — lose it and your funds are gone forever.
Proof of Reserves CeFi
A cryptographic audit showing that a platform actually holds the assets it claims to hold.
R
Regulation Tax & Legal
Government rules governing crypto lending platforms — varies wildly by jurisdiction.
Rehypothecation CeFi
When a lender re-lends your deposited collateral to generate additional yield — a key risk factor.
Repayment Loan Basics
Returning the borrowed amount plus interest to the lender to reclaim your collateral.
S
Seed Phrase Risk & Safety
A 12- or 24-word recovery phrase that can restore your entire crypto wallet — guard it with your life.
Self-Custody CeFi
Controlling your own private keys — "not your keys, not your coins." Standard in DeFi.
Smart Contract DeFi
Self-executing code on a blockchain that automates lending, borrowing, and liquidation without intermediaries.
Smart Contract Audit DeFi
A professional security review of a DeFi protocol's code — the closest thing to a safety certification in DeFi.
Smart Contract Risk Risk & Safety
The risk that a bug or vulnerability in DeFi code leads to loss of funds.
Stability Fee DeFi
The interest-like fee charged by MakerDAO for minting DAI against your crypto collateral.
Stablecoin Loan Basics
A cryptocurrency pegged to a stable asset like USD. Most crypto loans are disbursed in stablecoins.
Staking Loan Basics
Locking crypto to validate blockchain transactions and earn rewards — often confused with lending, but fundamentally different.
T
Tax Efficiency Tax & Legal
Structuring transactions to minimize tax liability — the main reason many people choose crypto loans.
Taxable Event Tax & Legal
An action that triggers tax obligations — selling crypto is one, but borrowing against it usually isn't.
TVL (Total Value Locked) DeFi
The total amount of crypto deposited in a DeFi protocol — a key measure of its size and trust.
U
V
W
Y
Understanding Crypto Loans: Key Concepts
How Crypto-Backed Loans Work
You deposit cryptocurrency as collateral and receive a loan in stablecoins or fiat. Your LTV ratio determines how much you can borrow — typically 25–75% of collateral value. If your collateral drops in value past the liquidation threshold, the platform sells your assets to cover the loan.
DeFi vs CeFi Lending
DeFi platforms like Aave and MakerDAO use smart contracts — no company holds your crypto. CeFi platforms like Nexo and Ledn offer custodial services with customer support. DeFi gives you transparency and self-custody; CeFi gives you convenience and human assistance.
Risks to Understand
Key risks include liquidation (your collateral is sold if prices drop), counterparty risk (the platform could become insolvent, as Celsius and BlockFi did in 2022), and smart contract risk (bugs in DeFi code). Always check a platform's proof of reserves and audit history.