Domain Context
The vocabulary, acronyms, and ecosystem map. Skim before the loop; refer back to whenever an interviewer uses a term you can't immediately gloss.
Core lending vocabulary
| Term | Definition |
|---|---|
| TVL | Total Value Locked — total dollar-value of assets deposited into a protocol. |
| LTV | Loan-To-Value — instantaneous ratio of borrowed value to collateral value. |
| LLTV | Liquidation LTV — threshold above which a position becomes liquidatable. |
| Health factor | collateral × LLTV / debt. < 1 means liquidatable; ≥ 1 means safe. |
| Bad debt | Debt with insufficient collateral backing. |
| Solvency | Property that suppliers can always be repaid from collateral + reserves. |
| Close factor | Max fraction of a position's debt repayable in a single liquidation. |
| Liquidation incentive (LI) | Bonus to the liquidator on the collateral they seize. |
| Pre-liquidation | Smaller, gentler liquidation triggered before full LLTV, often opt-in. |
| Bad-debt socialization | Distributing a loss across all suppliers (haircut to share value). |
| Isolated market | One collateral, one loan token, risk isolated. |
| Cross-collateral / pool | Single account aggregates multiple collaterals as backing. |
| Singleton | One contract for all markets (vs factory per market). |
| ERC-20 | Fungible-token standard. |
| ERC-4626 | Tokenized-vault standard: deposit assets, receive shares. |
| Callback / hook | Function called by the protocol back into the user mid-tx (flash loans, complex flows). |
| Flash loan | Uncollateralized loan that must be repaid in the same tx. |
Rates & accrual
| Term | Definition |
|---|---|
| IRM | Interest Rate Model — function mapping utilization to borrow rate. |
| Utilization | totalBorrow / totalSupply. Drives the IRM. |
| Kink | The utilization at which the IRM slope steepens; usually 80-90%. |
| Reserve factor | Fraction of interest paid to treasury rather than suppliers. |
| Supply rate | borrowRate × utilization × (1 - reserveFactor). |
| Adaptive IRM | Rate target moves dynamically based on persistent utilization deviation. |
| WAD / RAY | Fixed-point scaling: 1 WAD = 1e18, 1 RAY = 1e27. |
| Accumulator | Running total of compound interest factor; positions multiply by it to find debt. |
| Fixed-rate loan | Loan whose rate is locked at deal time; may be fixed-term (matures) or perpetual (rolled). |
| IRS | Interest Rate Swap — exchange a floating-rate stream for a fixed one. Underlies several "fixed-rate DeFi" designs. |
Oracles & prices
| Term | Definition |
|---|---|
| Push oracle | Off-chain network pushes prices to chain on a schedule / deviation trigger (Chainlink-style). |
| Pull oracle | Consumer fetches and posts a signed update at use time (Pyth-style). |
| TWAP | Time-Weighted Average Price — geometric mean of price observations over a window. |
| Sqrt price (Q64.96) | Uniswap v3 price representation as the square root, in fixed-point with 96-bit fraction. |
| Tick | Log-base-1.0001 of a Uniswap v3 sqrt price; integer; addresses ranges by tick. |
| Cardinality | Length of Uniswap v3 observation buffer; how far back a TWAP can reach. |
| Staleness | Time since last oracle update; protocol must reject prices beyond a bound. |
| Sequencer feed | Chainlink feed reporting L2 sequencer uptime; integrate with grace period. |
| Confidence interval | Pyth's reported uncertainty band around a price. |
MEV & gas
| Term | Definition |
|---|---|
| MEV | Maximal / Miner Extractable Value — value captured by transaction ordering. |
| Priority gas auction (PGA) | Searchers bid via tip to be first; usually for liquidations / arbitrage. |
| Sandwich attack | Frontrun + backrun a victim swap to extract slippage. |
| Flashbots / private mempool | Submit tx to a relay so searchers can't see / frontrun. |
| EIP-1559 | Base-fee + priority-tip transaction pricing model. |
| Base fee | Protocol-defined, dynamically-adjusted minimum fee per gas in EIP-1559. |
| Blobspace / EIP-4844 | Cheap data availability for rollups; "proto-danksharding." |
| Gas limit | Per-block gas budget; ~30M on mainnet, far higher on most L2s. |
| Block builder | Constructs the block; sells the right to validators. |
Account abstraction & intents
| Term | Definition |
|---|---|
| EOA | Externally Owned Account — a private-key account. |
| EIP-4337 | Account abstraction via a higher-layer UserOperation pool + EntryPoint contract. |
| EIP-7702 | EOAs can delegate code temporarily; lets EOAs act like smart accounts without redeploy. |
| Smart account / contract account | An account that is a contract; supports signature validation, sponsorship, batching. |
| Paymaster | 4337 contract that pays for a user's gas in exchange for tokens or sponsorship. |
| Bundler | 4337 node that batches UserOperations into a real tx. |
| Intent | User declares a desired end-state; solvers compete to realize it (e.g., CoW Swap, UniswapX). |
| Solver | Off-chain actor that finds the execution path to satisfy intents. |
Cross-chain & bridges
| Term | Definition |
|---|---|
| Bridge | Protocol moving assets / messages between chains. |
| Canonical bridge | The rollup's own L1↔L2 bridge; usually trust-minimized but slow. |
| LayerZero / CCIP / Wormhole / Hyperlane | Generic messaging protocols; trust assumptions vary. |
| Light client | Verifies a chain's consensus on-chain at another chain (e.g., for trust-minimized bridging). |
| Optimistic verification | Bridge assumes messages valid; dispute window for fraud proofs. |
| Multi-sig bridge | External committee signs cross-chain messages; trust = committee. |
| ZK bridge | Bridge verified by zero-knowledge proof. |
Restaking & LSTs
| Term | Definition |
|---|---|
| LST (Liquid Staking Token) | Tokenized claim on staked ETH + rewards (stETH, rETH, cbETH). |
| LRT (Liquid Restaking Token) | Restaking-derivative tokens (ezETH, weETH, rsETH). |
| Restaking | Re-using staked ETH to secure additional services (AVSes). |
| AVS | Actively Validated Service — uses restaked ETH for security. |
| Slashing | Penalty applied to staked / restaked ETH for misbehavior. |
| EigenLayer / Symbiotic / Karak | Restaking protocols. |
The protocol ecosystem at a glance
| Category | Major protocols | What they ship |
|---|---|---|
| Lending / money markets | Aave, Compound, Morpho, Euler, Spark, Fluid, Silo, Radiant | Supply/borrow primitives, vaults atop them |
| DEXes | Uniswap, Curve, Balancer, Maverick, Trader Joe | AMMs, concentrated liquidity, stable-swap curves |
| Perps | GMX, Hyperliquid, dYdX, Vertex, Drift, Synthetix Perps | Perpetual futures, on-chain order books |
| Oracles | Chainlink, Pyth, RedStone, API3, Chronicle, UMA | Price feeds, randomness, attestation |
| Restaking | EigenLayer, Symbiotic, Karak | Restaking marketplaces for AVSes |
| Stablecoins | MakerDAO/Sky, Liquity, Frax, Aave GHO, Ethena, crvUSD | USD-pegged tokens, varying collateralization |
| Yield aggregators | Yearn, Pendle, Convex, Aura, Origin | Strategy vaults, yield trading |
| Bridges / messaging | LayerZero, CCIP, Wormhole, Hyperlane, Axelar | Cross-chain messaging |
| Structured products | Pendle (PT/YT), Ribbon, Aevo, Dopex | Yield tokenization, options vaults |
| RWAs | MakerDAO, Centrifuge, Ondo, Maple | Tokenized real-world assets |
Rollups & L2s
| Rollup | Type | Notes |
|---|---|---|
| Arbitrum One / Nova | Optimistic | Largest TVL L2; fraud-proof system live |
| Optimism / OP Stack | Optimistic | Bedrock; superchain ecosystem (Base, Mode, etc.) |
| Base | Optimistic (OP Stack) | Coinbase L2; large user base |
| Unichain | Optimistic (OP Stack) | Uniswap's L2; DEX-centric |
| zkSync Era | ZK rollup | Custom VM (EraVM); different gas semantics |
| Scroll | ZK rollup | Bytecode-equivalent EVM |
| Linea | ZK rollup | Consensys L2 |
| Polygon zkEVM / PoS | ZK / sidechain | Two products; check which one |
| Blast | Optimistic, native-yield | Built-in yield on ETH/stables |
| Mantle / Manta / Mode / etc. | Various | Long tail of OP Stack / Arbitrum Orbit chains |
Multi-chain pragmatics
For a senior protocol engineer, the relevant L2 facts are: (a) is the EVM bytecode-equivalent (most yes; zkSync Era no), (b) how does the sequencer downtime affect oracles, (c) what's the canonical bridge, (d) what's the L1 finality assumption. Memorize the answer for the three or four chains your target protocol is on; recognize the rest.