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Aavegotchi after reading GotchiGlossary

If you've just begun exploring the world of DeFi, welcome to this corner of the internet! This glossary aims to provide you with some information that will hopefully help you wrap your head around some DeFi basics. If you're completely new to this space, this glossary will also provide you with an overview of some terms you can expect to see when navigating the Aavegotchi world, to help boost your understanding further.

When you're done reading this and hopefully have a better understanding of these terms, feel free to hop over to the ONBOARDING SECTION and dive into ecosystem proper.


Aavegotchis are pixelated ghosts living on the Ethereum blockchain, backed by the ERC-721 standard. Their value is determined by rarity level, which is calculated via multiple factors, such as base traits, amount of staked collateral, and equipped wearables.


Points that are rewarded to users who have staked GHST. FRENS is not a token. It is technically a balance within the Staking Contract. FRENS are not transferable and are meant to reward stakers for their contributions to the Aavegotchi project.

Spirit Force

Spirit Force refers to the amount of collateral (aTokens) locked within the gotchi.

Spirit Point

Spirit Point refers to the point a gotchi gets when it levels up. Kinda like stat points from RPG games. You get 1 spirit point per 3 levels.


Clothing/equipment that your Aavegotchi wears. They conform to the ERC-1155 standard.

DeFi 101

"DeFi" stands for Decentralized Finance. It can be thought of as an ecosystem of applications and protocols that provide similar services to traditional financial institutions (ie, lending, borrowing, and accruing interests from saving, amongst others). However, there is one key difference - DeFi aims to do this in a decentralized manner with no middle man.

That means no banks taking a cut of your potential returns or providing you with negative interest rates. That also means no central point of failure where the entire system could collapse, or be subjected to a set of rules decided and implemented by a small group with concentrated power.

At the time of writing (December 5 2020), the Total Value Locked in Defi stands at 14.24B USD.

Key Terms


APY stands for Annual Percentage Yield. This is the real rate of return earned on the savings you have deposited into a protocol, taking into account the effect of compounding your interest.


aTokens are interest-bearing tokens from the Aave Protocol. For step-by-step instructions as to how to get aTokens, please refer to our aTokens page.


Collateral is a pretty straightforward concept. It refers to an asset you might put down as a form of guarantee to a lender, when borrowing money from them. If you cannot pay back your loan, your collateral will be used to pay your debt.

In the context of DeFi, this is how things might look:

Let's say you want to borrow some assets from a protocol. For this to happen, you will need to set down a portion of your other assets as collateral. If you don't pay your loan back, the protocol will not release your collateral back to you.

In the Aavegotchi metaverse, collaterals are also known as Spirit Force.


Stands for Decentralized Autonomous Initial Coin Offering. It is a new fundraising method that seeks to incorporate the best features of a Decentralized Autonomous Organization (DAO) with those of an Initial Coin Offering (ICO) in order to create a structure that provides a higher level of effectiveness to the token sale fundraising model. A DAICO is a model whereby investors have control over the funds collected once the fundraising is over. The investors could influence how developers have access to the funds and at what frequency through a "tap" mechanism. In addition, investors can also vote to do away with the project and have their funds returned.


Otherwise known as a Decentralized Autonomous Organization. These are organizations that are organizations governed by rules as encoded by smart contracts and controlled by its members. This is as opposed to traditional organizational models, which often tend to be governed by a small group of authority figures.

In the context of the AavegotchiDAO, what this means is that members of the ecosystem will be able to initiate and vote on proposals that will influence how the larger ecosystem will run. For instance, members might propose to increase the number of Portals available over time, amongst any other feature that they feel would help improve the community.

For more a more detailed explainer on DAOs, check out this page .


Otherwise known as a Decentralized Exchange. Such platforms allow users to handle transactions in a peer-to-peer manner, to obtain tokens through a user's own wallet with the help of smart contracts. This is as opposed to the way CEXs (Centralized Exchanges) work, which operate through a middleman (the CEX itself).

Some examples of DEXs include UniSwap, Mesa and Balancer.

Some examples of CEXs include Binance, Coinbase and OKex.

Flash Loans

Remember what we mentioned above about loans and collaterals? Well, flash loans are a form of loan that get around that need for putting down collateral. However, there's a catch.

The flash loan has to be repaid within the same transaction block.

If this doesn't happen, the whole transaction is reversed to effectively undo the actions executed up until that point. You can read more about Flash Loans here.

Impermanent Loss

Impermanent loss occurs when you provide liquidity to a pool (see Liquidity Pools), and the price of your deposited assets changes compared to when you deposited them. This would result in a loss if, at the point in time you wish to withdraw your assets, the price has decreased from when you first deposited them. This leads to a lower dollar value at the time of your withdrawal.

Liquidity Pools

The term is somewhat self-explanatory. These are pools of tokens that are locked in a smart contract. They are in turn used to facilitate trading by providing liquidity.

For a more detailed breakdown of these terms, check out Finematics's guide.


maTokens are aTokens on Polygon. They are developed by our very own Nick Mudge.

For step-by-step instructions on how to convert aTokens on Ethereum Mainnet to maTokens on Polygon, do refer to this maTokens guide.


In order for Smart Contracts to execute, certain conditions need to be met. Information about the presence of these conditions needs to be fed to the blockchain that the contract is on. This is because blockchains typically do not have ready access to information outside of the chain. This is where oracles come into the picture. These entities provide the necessary data to trigger smart contracts.

Smart Contracts

Generally speaking, a smart contract is a self-executing contract with the "terms of agreement" between the users of the contract being directly written into the code of the contract itself. When these predetermined terms and certain conditions are met, the contract executes.


Staking a cryptocurrency essentially means to hold that currency, to help verify transactions and support the network. In exchange for doing so, stakers typically receive some kind of reward. In the Aavegotchi world for instance, $GHST stakers are rewarded with FRENS (points) that they can use to buy tickets and win prizes in periodic raffles.

Yield Farming

Very simply put, yield farming is a practice that allows users to earn rewards by depositing and lending their assets in a particular protocol.

This can happen in a variety of ways, but the most common mechanism is when depositers/borrowers earn coins from a protocol, by simply staking their ERC-20 tokens and/or stable coins on its platform. Usually, these rewards are used to incentivize potential depositers and borrowers to add liquidity to a particular platform.

General Terms


Aragon is an open-source, community-driven project with the mission to empower freedom by creating tools for decentralized organizations to thrive.

The flagship product of the project is the Aragon client, a tool for creating and participating in decentralized organizations on Ethereum. The project is also building the Aragon Network, the world's first digital jurisdiction.

The Aragon project is stewarded by the Aragon Association, a non-profit entity based in Zug, Switzerland, and governed by Aragon Network Token holders.

Check out their site here.

Bell Curve

A bell curve is a common type of distribution for a variable, also known as the normal distribution. The term "bell curve" originates from the fact that the graph used to depict a normal distribution consists of a symmetrical bell-shaped curve. See this page for more information.

Diamond Standard

The Diamond Standard is created by our very own Nick Mudge. The Diamond Standard enables people to write contracts with virtually no size limit in a modular and gas-efficient way.

Diamonds can be upgraded on the fly without having to redeploy existing functionality.

Standardizes contract interfaces and implementation details of diamonds, enabling software integration and interoperability.

A diamond is a contract that implements the Specification in this standard.

See here for more information.


A token standard for fungible token, in other words, they have a property that makes each Token be exactly the same (in type and value) of another Token. It provides functionalities such as transferring tokens from one account to another, getting the current token balance of an account and also the total supply of the token available on the network. Besides these, it also has some other functionalities such as approving an amount of tokens that can be spent by a third party account. See here for more information.


A free, open standard that describes how to build non-fungible or unique tokens on the Ethereum blockchain. While most tokens are fungible (every token is the same as every other token), ERC-721 tokens are all unique.

Think of them like rare, one-of-a-kind collectables.

For a full explanation of what the ERC-721 standard entails, check it out here.


ERC-998 is an extension to the ERC-721 standard that adds the ability for non-fungible tokens to own other non-fungible tokens and ERC-20 tokens.

Non-fungible tokens that implement ERC998 also implement the ERC-721 standard.

For a full explanation of what the ERC-998 standard entails, check it out here.


A metaverse is a virtual world where you can interact with aspects of the world itself (like games or shops) as well as with other users.

Some examples of metaverses include the Aavegotchi Realm in addition to projects like Second Life and Decentraland.

Non-Fungible Token

A non-fungible token (NFT) is a special type of cryptographic token which represents something unique, meaning it cannot be swapped out for any other token. Non-fungible tokens typically represent ownership of items such as wearables, works of art, or any other type of property.

The opposite of a non-fungible token is one that can be exchanged for any other of its kind, like USDC or Bitcoin. Tokens that can be swapped 1:1 for a coin of the same kind are known as fungible tokens.


Polygon (Formerly Matic Network) is a scaling solution for public blockchains. Based on an adapted implementation of Plasma framework (Plasma MoreVP) - with an account based implementation, Polygon supports all the existing Ethereum tooling along with faster and cheaper transactions.

To transfer tokens from the Ethereum Mainnet to Polygon, please refer to this guide.

Read more about Polygon here.

Proof of Stake

Proof of Stake (PoS) is a kind of consensus mechanism that blockchains can use to agree upon a single true record of data history. In a PoS blockchain, validators commit stake to attest (or ‘validate’) blocks into existence.

Validators are the participants on the network who run nodes (called validator nodes) to propose and attest blocks on a PoS blockchain. They do so by staking crypto (in the case of Ethereum 2.0, ETH) on the network and make themselves available to be randomly selected to propose a block. Other validators then “attest” that they have seen the block. When a sufficient number of attestations for the block has been collected, the block is added to the blockchain. Validators receive rewards both for successfully proposing blocks (just as they do in PoW) and for making attestations about blocks that they have seen.

Read more about the Proof of Stake consensus mechanism here.


QuickSwap is a permissionless decentralized exchange (DEX) based on Ethereum, powered by Polygon’s Layer 2 scalability infrastructure. By utilizing Layer 2 for transactions, QuickSwap users will be able to trade any ERC20 asset at lightning-fast speeds with near-zero gas costs.

QuickSwap can be accessed here.