仮想通貨に関する用語集(CRYPTO GLOSSARY) L行

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Ladder Trading

Ladder trading is a strategy where an asset buyer or seller places multiple limit orders at varying price levels.

What Is Ladder Trading?

Ladder trading is a technique that traders use to manage risk and achieve a better average entry or exit price. Instead of trying to time the bottom or sell the exact top, a trader builds a “ladder” of orders. If the price moves through these levels, the orders are filled sequentially, like stepping up or down the rungs of a ladder. This method is particularly useful for dealing with high volatility.

Since crypto prices can swing wildly in short periods of time, a ladder ensures that at least some part of a trade is executed at favorable prices without the trader needing to manually react to every tick on a chart. It is also a core feature of “Depth of Market” (DOM) trading interfaces, which allow professional traders to visualize and interact with the order book in a vertical format.

How Does Ladder Trading Work?

A typical laddering strategy involves dividing a total investment into smaller portions and spreading them across predetermined price “rungs.”

1. Defining the Range: A trader identifies a support zone (for buying) or a resistance zone (for selling) where they believe the price will fluctuate.

2. Spacing the Rungs: The trader places several limit orders within that range. For example, if Bitcoin is at ＄95,000, a buyer might place orders at ＄94,500, ＄94,000, ＄93,500, and ＄93,000.

3. Order Sizing: Traders can use equal sizes for each rung, or they can “weight” the ladder. To explain, a heavy-bottom ladder would involve placing larger buy orders at the lower rungs to capture more volume if a deeper price dip occurs.

4. Execution: As the market moves, these orders are filled automatically. If the price only hits the first two rungs before reversing, the trader is still in the trade with a partial position, whereas a single lower limit order might have missed the move entirely.

Ladder Trading vs. Dollar-Cost Averaging (DCA)

While both involve buying in pieces, they serve different purposes. Dollar-cost averaging (DCA) is a long-term strategy where you buy at regular time intervals (e.g., ＄100 every Monday) regardless of price.

Ladder Trading is a tactical strategy based on price levels, usually executed over a much shorter timeframe to optimize a specific market entry or exit.

Latency

Latency is the time taken for a transaction to be verified and confirmed after it is submitted to the blockchain network.

What Is Blockchain Latency?

Blockchain latency is the total turnaround between the initiation of a transaction on the blockchain and the time of its confirmation/inclusion in a block. It is one of the key performance indicators of blockchain that measures the delay in transactions.

When a user initiates a transaction, it is sent across nodes of the network for validation. Nodes verify transaction details to achieve consensus (an agreement on the validity of the transaction) and once confirmed, the transaction is included in a block to be added to the network. As blocks are added, the transaction becomes more final, or, say, irreversible.

Blockchain latency can vary depending on factors like network congestion and nodes available. For payment systems that require real-time operations, low blockchain latency is crucial—that is quicker transactions and a smoother user experience.

Another kind of delay in blockchain is network latency. It is the amount of time it takes for data to travel from one node to another within the blockchain network. Blockchains with lower network latency generally have improved processing and achieve consensus faster.

Throughput and Latency

Blockchain performance and use case rely both on throughput and latency. While blockchain latency measures transaction delay, throughput is the capacity of a network to handle multiple transactions.

Throughput indicates the total number of processed transactions per second (TPS) in the blockchain. A higher throughput means more data can be transmitted with every transaction processed per second.

But oftentimes there’s a trade-off between either due to consensus mechanism, congestion, and other factors. A blockchain might have low latency but limited throughput, or higher throughput with longer transaction confirmation times.

For example, the Bitcoin network has a throughput of 7 TPS, and latency is 10 minutes per transaction. Even if there are fewer transactions to be processed on the network, it will still take 10 minutes for transactions to get validated and added to the network.

However, an increase in network congestion can lead to longer confirmation times for users, from minutes to hours with the same throughput of 10 TPS.

 

Layer 0

Layer 0 is the foundational infrastructure on which other blockchains and applications are built.
What is Layer 0 in Blockchain?
A blockchain ecosystem is categorized into layers based on how the blockchain is built and how it executes its function. Layer 0 is the foundational layer where other blockchains, especially Layer 1s, are built. It is basically the “blockchain for blockchains”.

Layer 1 blockchains form the basis for developers to build their applications. Layer 2 blockchains are the scaling solutions built on top of the Layer 1s to improve their capabilities, such as network efficiency and higher transaction throughput. Examples of Layer 2 solutions are Lightning Network and Plasma.

Finally, Layer 3 describes the protocols built on top of Layer 2 to provide application-specific networks. Layer 3 hosts other dApps, crypto wallets, and games.

Layer 1 blockchains, such as Ethereum and Solana, are more popular. However, they are considered monolithic, meaning all their functions are sustained on a single network. And as their popularity continues to grow, they have become prone to blockchain trilemma (also called the scalability trilemma), where the developers face a tradeoff between scalability, decentralization, and security. Layer 0s aims to tackle this trilemma.

What Blockchain Challenges Can Layer 0 Solve?

Scalability Issues

Layer 1 blockchains face difficulties in improving transaction throughput and efficiency without compromising security and decentralization.

When a single protocol is responsible for all the critical functions, such as establishing consensus, executing transactions, and making data available, it can make monolithic blockchains overwhelmed. The blockchain’s ability to adapt to growing demand is then compromised.

Interoperability Problems

Interoperability is the ability of blockchain networks to communicate and share resources freely. Most layer 1 blockchains are created through specific designs that hinder interoperability and need dedicated bridges to share resources.

Flexibility and Usability Issues

Flexibility and usability are the ease with which a dApp can be utilized on different blockchains. Layer 1 blockchains are only compatible with dApps developed using specific protocols. For instance, a dApp built for Solana will not run on another chain, such as Ethereum or Cardano.

How Do Layer 0 Protocols Solve Scalability Trilemma?

Layer 0 blockchain protocols are made of three elements that work to solve the blockchain challenges for host networks. The elements include the main chain, side chain, and cross-chain transfer protocol.

Main chain

The central block or main chain is the underlying infrastructure that enables the Layer 0’s consensus and governance mechanisms. It also records and preserves transactions from Layer 1’s.

Sidechain

Sidechains are protocols to sustain dApps and address Layer 2’s scalability challenges. Sidechains run independently from the parent blockchain and have different features and functionalities, such as consensus algorithms and block parameters.

Sidechains offer more optimized end-user experiences and facilitate seamless resources and data sharing between blockchains.

Cross-chain Transfer Protocol

The Cross-chain (inter-blockchain) transfer protocol is the mechanism that facilitates seamless communication and data exchange between chains without the need for dedicated bridges.

 

Layer 1 Blockchain

Layer 1 is the foundational layer of a blockchain network that provides the underlying infrastructure to securely process and validate transactions.

What Is a Layer 1 Blockchain?

Layer 1 is the first and most fundamental layer in the blockchain technology stack, and it sets the foundation for all other layers to be built upon. It is the first layer of a blockchain network. It establishes the rules and protocols that govern the entire network and ensures the secure and efficient processing of transactions.

A real-world example of a layer 1 blockchain is Bitcoin. Bitcoin’s layer 1 is designed to ensure the security and immutability of transactions on its network. It achieves this through a consensus mechanism called proof-of-work (PoW), which incentivizes network participants to compete to solve complex mathematical problems. By solving these problems, miners can add new blocks of transactions to the blockchain, which are then verified and validated by other nodes on the network. This process ensures that only valid transactions are added to the blockchain and that the network remains secure and decentralized.

They form the base for every process on the network and its infrastructure consists of various components such as consensus mechanism, data structure, and networking protocols.

Challenges Of Layer 1 Blockchain

One of the most significant challenges faced by layer 1 networks is scalability. Due to their limited ability to process transactions, it is challenging for them to compete with centralized systems. For instance, Ethereum, a popular layer 1 blockchain, can only process 15 TPS (Transactions per second), which is notably slow in comparison to centralized systems like Visa, which can handle up to 1700 TPS.

The reason for this slower processing speed is because these blockchains require access to their entire network to validate a transaction before adding it to the blockchain. This challenge is a part of what is known as the “blockchain trilemma.” The blockchain trilemma or scalability trilemma suggests that developers face a trade-off between three competing blockchain properties: decentralization, scalability, and security.

The trilemma theory posits that a blockchain can only successfully offer two of these properties at a time. Thus, decentralized blockchains like Ethereum and Bitcoin must choose between security and scalability, and in most cases, they choose security over scalability. To address this challenge, many layer 1 networks rely on scaling solutions such as layer 2 blockchains and blockchain rollups to enhance transaction speed and lower transaction fees. These scaling solutions are strategies for improving layer 1 scalability and the overall network performance.

Layer 2 Blockchain

A layer 2 blockchain is a secondary network built on top of an existing blockchain network. It is a solution to extend the capabilities and performance of the base network.

What is a Layer 2 Blockchain?

A layer 2 network is a secondary protocol that operates on top of an underlying blockchain as a scaling solution. The underlying protocol is a layer 1 blockchain, which constitutes the infrastructure and consensus mechanism on which these secondary networks and other applications operate.

But what’s the need for a secondary layer?

So layer 1 protocols are required to process more transaction data as the number of users in the network increases. However, most layer 1 networks, such as Ethereum and Bitcoin, have a limited capacity to process transactions per second (TPS). For instance, Ethereum processes up to 29 TPS. This leads to network congestion and increased transaction fees as their user base grows. In return, it hinders their long-term growth and widespread adoption.

Typically, layer 2 solutions solve the limitations of layer 1 by enhancing its overall performance or operational capabilities. This includes improving the underlying network’s transaction throughput, scalability capacity, and transaction costs. Since they are built on top of another blockchain, they inherit the security of the protocol they operate on.

How Do They Work?

Layer 2 solutions are composed of two major parts:

・The network to which transaction processing is abstracted.
・A smart contract on the layer 1 solution.

The smart contract on layer 1 is responsible for holding and releasing the cryptocurrency sent to the secondary network. It also provides verifiable proof (from layer 2) to the underlying blockchain regarding the integrity of the requested state change, validates it, absolves any disputes, and finalizes transactions.

As processes and transactions take place outside the main chain, layer 2s can be regarded as off-chain scaling solutions. By abstracting transactions away from on-chain, layer 2 solutions enable high throughput. In summary, the main chain delegates most of its operations to the layer 2s. So layer 2s are designed to perform thousands of transactions per second while inheriting the security of layer 1s.

Ledger

A ledger is a digital or physical log that records transactions associated with a financial system. Blockchain networks are a type of decentralized ledger system designed to store data securely.

What is Ledger in Crypto

A ledger (not to be confused with Ledger) is a record-keeping system: it tracks value as is moves around, so the viewer can always see exactly what value resides where at a given moment. Traditional finance systems like banks use ledgers to track all transactions completed within a period.

Blockchains are a form of digital ledgers that validate and store all transactions within their network. For example, the Bitcoin blockchain records all transactions involving bitcoins using blocks secured by cryptography.

Blockchain technology is an effective ledger system because it operates an immutable and autonomous record-keeping network, which means that you can’t change any data once it is stored on the blockchain.

What is a Public Ledger In Crypto?

A public ledger is an open-access network; anyone can join at any time. The public ledger is fully decentralized, and no single entity controls the blockchain network. The Bitcoin and Ethereum blockchains are both considered public ledgers.

Public ledgers are also the most secure blockchains; they maintain a pseudo-anonymous system for their users’ identities. While all transactions are recorded publically, user identities remain private.

This means that while you can view any wallet address with its balance and transaction records, you cannot gain access to the identity of the wallet owner.

The General Purpose of a Crypto Ledger

A crypto ledger keeps an immutable record of all transactions on a cryptocurrency network. This system helps keep users’ identities anonymous, while still maintaining an accurate history of transactions within the network.

Leverage

Leverage refers to when individuals use borrowed money or capital to amplify their buying or selling power in a market.

What is Leverage Trading in Crypto?

Leverage is used in a variety of contexts, including business, personal finance, investing, and cryptocurrency trading. In business, it is used to assess an organization’s financial position, including financing operations, projects, and purchasing assets.

Assume you’re running a small business and you intend to make more profit for expansion. Rather than selling your company shares, you approach a broker for a debt to raise money to finance large purchases. The borrowed money will increase your company’s potential for profits. However, it will also increase the economic burden if you instead experience losses and fail to repay the debt. By borrowing funds from the broker to boost your purchasing power, you have used leverage.

In the context of crypto, leverage trading describes using borrowed capital or debt as collateral to make trades or gain greater exposure to a position. When individuals use leverage in crypto, they are essentially borrowing money from a broker to purchase more crypto than they could afford with their own capital. If the cryptocurrency’s value appreciates, it will make a profit on the original investment plus the borrowed funds. However, if the price of the cryptocurrency goes down, you will lose money on both your original investment and the borrowed funds.

Investors and traders utilize leverage to engage in trading different types of crypto derivatives, such as margin trading and futures contracts.

How Does It Work?

Leverage trading requires that individuals have a certain amount of capital, called margin, that acts as collateral to the borrowed funds. The leverage is expressed as a ratio of the margin to the potential loan amount. An investor utilizing a 1:50 leverage, commonly expressed as 50X, will purchase a cryptocurrency worth 50 times their initial investment. This means that if they have ＄100 in their account, they can make a trade worth ＄5000.

If traders using leverage incur losses, they inject more crypto into their accounts to maintain a margin threshold. Otherwise, they risk liquidation if the margin falls below the threshold. Traders use it to open a long position if they believe the crypto asset will go up, and a short position if they expect the asset’s price to go down.

LFG

LFG, the acronym for “Let’s Fucking Go” or “Let’s Freaking Go,” represents an expression of excitement, enthusiasm, or support toward a crypto project or market.

What Does LFG Mean?

LFG is an acronym that has two main meanings:

“Looking For Group” — is a term that means the person who wrote it is looking for someone or a group of people to join their team or group for a game or mission.

“Let’s Freaking Go” — is a term that means a way for a person to celebrate victories or exciting moments.
You can identify the correct meaning based on the context. Let’s dive into all different contexts.

What does LFG mean in Social Media?

In social media, LFG usually means “Let’s Fucking Go” or “Let’s Freaking Go”, which is a phrase that expresses excitement and motivation, or rallies people to a shared cause. It serves as a call to action to encourage people to engage in a specific activity or event.

You might come across LFG on platforms like Twitter, TikTok, or Instagram when users want to express their eagerness to join a challenge or support a cause. Using it in a comment on someone’s post is a great way to share excitement and show interest in a particular event or cause.

Examples of How to Use LFG Acronym in Social Media

Now you know what LFG in social media means, we can look at how to use it in a sentence. Here are some examples:

“Just signed up for my first marathon! LFG!!!”

“LFG! Just launched my new podcast and I can’t wait for everyone to hear it!”

“We’re very excited to see the Linkin Park concert tomorrow. LFG!”

Utilization of LFG in Crypto Twitter

Crypto Twitter is a linguistic world of its own, where jargon, slang, and cryptic phrases reign supreme. In this whimsical realm, words aren’t just words but a reflection of the emotions resonating through the cryptoverse. Like HODL (Hold Onto Dear Life), being a typo for “hold” in a Bitcoin chat forum, turned into a symbolic gesture to hold onto one’s crypto asset despite market downturns. Or WAGMI (We’re All Gonna Make It), an expression that builds confidence and combats uncertainty amongst crypto investors in volatile market conditions. Or When Lambo, Rekt, name them.

LFG is another quirky lexicon that whets the arsenal of crypto Twitter. It stands for “Let’s Fucking Go” or “Let’s Freaking Go”. It defines the excitement or enthusiasm an individual or community feels about a promising cryptocurrency project.

Individuals use LFG to hype each other up regarding a particular event, project, or situation. Simply put, it serves as a beacon of determination and enthusiasm to convey the hype about a rallying cryptocurrency asset, NFT project, or thrilling blockchain developments. For example, “Crypto winter is gone, let’s ride this bull run to the moon, LFG!”

What does LFG mean in Gaming?

The term LFG is widely believed to have originated in the gaming community, where it has long stood for “Looking For Group.” This acronym became popular with the rise of early multiplayer online games, notably EverQuest, which launched in 1999.

In many online multiplayer games, players often need to join groups to tackle quests or challenges. Solo players could type LFG in the game chat or chat forums to seek out other gamers to form a guild or group to complete the same objective or play in multiplayer games together.

More recently, gamers have also adopted LFG to express excitement, using it to mean “Let’s Freaking Go. To interpret LFG correctly, context is key. If a solo player is in a game and needs help to complete a quest, they’re likely looking for a group. Alternatively, if it’s outside a quest context, it might mean “Let’s Freaking Go”.

Examples of How to Use LFG Acronym in Gaming

Now you know what LFG means in games, we can look at how to use it in a sentence. Here are some examples you can find on Discord, Twitter, Reddit Twitch, or Facebook groups:

“I’m in World Of Warcraft LFG. Level 30+ tank, DPS, and support needed.”
“LFG to play League of Legends with. Who’s in?”
“LFG for some Apex Legends duos. Anyone ready to team up?”
What does LFG mean in Sports?
Similar to gaming, in sports, LFG can be used as a motivational phrase to rally teams or encourage an athlete to reach a new personal best. For example, a coach might use LFG during a pep talk to inspire their team before a big game.

But depending on the context, in sports, LFG can also be used to indicate your desire to team up with other athletes. For example, “LFG for a casual tennis match this afternoon. Open to all skill levels!”.

Light Node

A light node is a blockchain component that stores limited or lightweight information rather than a complete copy of the network. Light nodes simply act as communication endpoints.

What is a Light Node?

A node is any device or computer connected to a blockchain network, responsible for transmitting information about transactions and blocks within the network. Nodes regularly update each other with the latest information added to the network. Some nodes contain a complete copy of the protocol, while others contain only limited information. The ones storing limited information, information regarding previous blocks, are known as light nodes.

A light node (lightweight node) is a crucial component of a blockchain network that stores only the block headers. A block header is typically a detailed summary of a particular block, or the information used to identify a specific block on a blockchain. Light nodes require significantly less resources, such as storage and download capacities, to function. Thus, they can operate on devices, like smartphones, with limited memory and space.

Light Node Vs Full Node

A full node, also known as a fully validating node, is a blockchain component responsible for storing and validating transactions. Every full node within a network contains a complete copy of the network. That is, they download a duplicate or reduced copy of the blockchain that contains all its histories, including blocks, timestamps, and transactions. They are also responsible for enforcing consensus rules and transmitting information to other full nodes.

Light nodes, on the other hand, are lightweight versions of the full nodes. They are typically smaller in size and contain only partial information about the network. In addition, they cannot function independently and rely on full nodes to relay information about the blockchain.

Functions of Light Nodes

Light nodes are simply pieces of software connected to full nodes to further validate information stored on the blockchain. They utilize full nodes as intermediaries to access the network and information like account balance. Instead of storing a copy of the entire blockchain, they store only a block header. The block header held is enough to verify and query the validity of previous transactions.

In other words, they validate transactions just like full nodes, but using simplified payment verification (SPV). SPV clients query other nodes for new transactions and blocks without downloading the entire blockchain.

Lightning Network

The Lightning Network is a second layer built on the Bitcoin blockchain designed to scale the blockchain’s capability and conduct transactions more efficiently.

What is the Lightning Network?

The Lightning Network is a secondary layer built on the main Bitcoin network designed to provide scalability and improve efficiency on the main network. LN is a layer-2 solution that operates separately from the layer 1 (main blockchain architecture) base level Bitcoin blockchain.

Despite being separate from the Bitcoin network, the Lightning Network has its own unique nodes and software and interacts with the main chain.

It creates a payment protocol that enables off-chain transactions. The transactions are fast and can be confirmed without verification from the main blockchain network. Since all transactions are processed off-chain, the BTC Lightning Network transaction fees are significantly lower than the main network fees.

How Does the Lightning Network Work?

The Lightning Network is built on blockchain smart contracts that create peer-to-peer payment channels between two parties. The payment channel works as a direct payment line and allows participants to conduct unlimited lightning-speed transactions away from the main network. The payment channel is a pool of funds that is shared between the two parties.

Let’s say that you want to split a dinner bill with your friends using Bitcoin. Normally, each of you would need to create a separate transaction on the Bitcoin blockchain, which could take a while to confirm and incur high fees. With the Lightning Network, however, you can open a payment channel with each of your friends. Then, each time you want to make a payment, you can send it through the payment channel instead of creating a new transaction on the blockchain. This allows you to split the bill instantly and with very low fees. Once you’re done splitting the bill, you can close the payment channels and all of the transactions will be settled on the Bitcoin blockchain.

The payment channel works as a mini ledger and is used to make instant small payments without involving the main network. All transactions are conducted securely through Bitcoin Lightning wallets. Once both parties confirm to close the channel, the transactions are consolidated into a single transaction and sent to be recorded in the main blockchain ledger. The transactions will take only a fraction of a second and the fees are minimal. Simplifying the smaller transactions into one transaction reduces network congestion and improves transaction speed.

What are the Benefits?

The Lightning Network provides a faster and cheaper way to complete Bitcoin transactions.

Benefits include:

Speedy transactions: Off-chain transactions make transaction speeds incredibly fast. Theoretically, LN can handle around 1,000,000 transactions per second, while the main Bitcoin network can only complete 7 transactions in a second.

Improved scalability: Users can make micro-transactions at regular intervals. LN also enhances scalability, because different parties can communicate and transact with each other through payment channels.

Less energy consumption: LN uses less computational power to conduct smaller transactions.
Enhanced security: Smart contracts ensure that transactions are safely conducted within the network and funds reach the recipients safely.

What are Its Drawbacks?

Bitcoin can be a difficult system for beginners due to its complexity, including addresses and fees that can be confusing to navigate. However, some wallets can simplify these complexities, allowing users to send and receive coins with relative ease. Unfortunately, the same cannot be said for the Lightning Network. Currently, there are limited options for smartphone apps that support Lightning nodes, and users must open channels before making any payments, which can be a time-consuming process.

It is still at the developmental stage and it is better to opt for the layer-1 Bitcoin network for larger payments. Besides, LN does not allow offline payments. Both parties have to be online to execute a successful transaction.

Limit Order

A limit order is an instruction to buy or sell an asset or security at a specific price level.

What is a Limit Order in Crypto?

A limit order in crypto is an instruction that traders place on an exchange to execute a trade at a desired price level. When such an order is in place, the trade will only be executed when the cryptocurrency hits a certain price. Limit orders are different from market orders, which are trade orders executed immediately at the current market price.

For instance, let’s say you want to buy Bitcoin but it is currently trading at ＄32,000. You can place a limit order to buy 1 BTC at ＄24,000. If the value of BTC drops to ＄24,000, your order will be executed and you will purchase 1 BTC at that price or lower.

How Do Limit Orders Work?

When an individual places limit orders, they are essentially indicating their willingness to buy or sell a certain amount of cryptocurrency at a specific price to the exchange. If the market value reaches the specified price level, the order will be filled. If the crypto does not meet the specified price, the order will remain in the order book until it is either filled, cancelled, or expires.

Limit orders can apply to buying or selling cryptocurrencies. A buy-limit order is only executed if the cryptocurrency’s price falls to or below the specified price. A sell limit order is only filled if the price hits or rises above the desired price.

Limit orders give traders more control over their investments by specifying the entry/exit price. This allows users to buy or sell assets at prices that are more favorable than the current market prices.

Liquid Staking

Liquid staking is a mechanism that allows users to lock up their cryptocurrency while still retaining their liquidity and tradability.

What Is Liquid Staking?

Traditional staking involves validators locking up the native token of a proof-of-stake (PoS) network to increase their chances of being pseudorandomly selected to confirm transactions and forge blocks. Other users also stake their tokens to liquidity pools to boost the liquidity of DEXs and DeFi protocols. As an incentive, the participants receive staking rewards in the form of the network’s native token. However, native staking comes with a tradeoff – staked tokens can no longer be used during the staking period.

Liquid staking (soft staking) addresses this challenge by introducing financial instruments, called liquid staking tokens (LST) or liquid staking derivatives (LSD), to represent the user’s staked tokens.

Similar to traditional staking, users lock up their cryptocurrency in a smart contract on the soft staking platform. The platform issues the user with a “receipt token” – the LST – which is pegged to the value of the staked tokens. Like any other cryptocurrency token, users can transfer, trade, and use these LSTs for lending or as collateral on other DeFi applications and services.

Users can unlock their tokens anytime they want to by burning the LSTs. Once the platform confirms that the LSTs are burned, it releases the staked tokens.

Examples of soft staking platforms include Lido Finance, StaFi Protocol, Harmony, and Rocket Pool.

What Are the Benefits of Liquid Staking

Soft staking holds a ton of advantages over regular staking. Some benefits include:

・Unlocked liquidity: Liquid tokens can be traded, transferred, and used in lending or as collateral for borrowing in DeFi protocols instead of remaining locked for a fixed period. As a result, the value and utility of the underlying cryptocurrency increase, thereby boosting liquidity.

・DeFi composability: By serving as derivatives for the staked tokens, LSTs are usable across countless DeFi platforms.

・Reward opportunities: This form of staking reduces the opportunity cost of staking by allowing users to earn staking rewards while still leveraging the value of their staked tokens. Thus, the LST can be used on other platforms to earn additional rewards on the same investment.

・Accessibility: Unlike traditional staking, which is bound by a lock-up period, users can redeem their staked tokens anytime in soft staking.

You can refer to the full article on Ledger Academy for a more detailed look into liquid staking.

Liquidation

Liquidation in crypto refers to the process of converting assets, typically leveraged positions or collateral, into cash to cover losses or repay borrowed funds when the market moves unfavorably.

What is Crypto Liquidation?

Crypto Liquidation refers to closing a trading position by converting a cryptocurrency asset to fiat currency or stablecoins. Trades are typically executed at levels that are less favorable than the current market price.

Liquidation, in the context of futures trading, is common in situations where a trader borrows money to improve their exposure to a trading position. It happens when a trader has insufficient capital to keep the position open or as an attempt to minimize losses. It can be either voluntary or involuntary (forced).

Voluntary liquidation occurs when the trader decides to cash out their cryptocurrency from a losing trade or for their own reasons. On the contrary, forced liquidation happens when the lender (the crypto exchange, smart contract, or broker) forcefully closes the trader’s position to prevent further losses and protect their capital.

In some cases, liquidation occurs before the initial capital is depleted.

What are Types of Liquidation?

There are two main types of crypto liquidation, which differ mainly in the extent to which a trading position is closed. It can either be partial liquidation or total liquidation.

Partial liquidation

A partial liquidation involves cashing out to prevent losing the entire trading stake. Thus, it occurs before the initial margin is depleted. It is usually voluntary. However, it can be forced based on the predefined agreement between the trader and the lender. In such a case, the position is closed before the initial capital is depleted to offset an extra liquidation fee.

Total liquidation

Total liquidation involves selling off an entire trading balance to offset losses. It often occurs in forced liquidation when the lender is forced to close a position to prevent losing their capital. The trader, however, loses their entire invested capital and may end up with negative balances.

Liquidity

Liquidity refers to the ease with which one asset can be converted into another asset without significantly affecting its market price.

What Is Liquidity?

In the digital asset ecosystem, liquidity is a measure of how quickly and efficiently you can buy or sell a cryptocurrency. High liquidity means there is a high volume of trading activity and a large number of buyers and sellers in the market.

In such an environment, you can execute large trades almost instantly with minimal slippage, which is the difference between the expected price of a trade and the price at which it is actually executed.

Conversely, low liquidity, often called an illiquid market, occurs when there are few participants or low trading volumes. In these scenarios, even a relatively small trade can cause the price of the asset to swing wildly. For traders and investors, liquidity is a vital indicator of market health and stability, as it ensures that they can enter or exit positions whenever they choose.

How Does Liquidity Work?

Liquidity is primarily driven by two factors: trading volume and the bid-ask spread. The bid is the highest price a buyer is willing to pay, while the ask is the lowest price a seller is willing to accept. In a highly liquid market, this spread is very narrow, meaning the costs of trading are low.

A key component of decentralized finance (DeFi) is that liquidity is often provided by liquidity pools. These are crowdsourced collections of tokens locked in a smart contract that provide the necessary depth for decentralized exchanges (DEXs) to function.

Users who deposit their assets into these pools are known as liquidity providers (LPs). In exchange for providing the fuel that allows others to trade, LPs earn a portion of the transaction fees generated by the pool.

The Importance of Liquidity

Liquidity is the lifeblood of a functioning market. It provides price stability by acting as a buffer against large buy or sell orders that would otherwise cause extreme volatility. Without sufficient liquidity, price discovery becomes inefficient, making it difficult for the market to reflect the true value of an asset. Conversely, high liquidity transforms a digital asset into a more usable, versatile form of value.

Liquidity Depth

Liquidity depth is a measure of a market’s ability to sustain relatively large orders without a significant change in the asset’s price.

What Is Liquidity Depth?

Liquidity depth provides a more granular view of market health than simple trading volume. While volume tells you how much of an asset has been traded over a period, depth shows you the volume of limit orders currently waiting to be executed at different price levels.

In a deep market, there are large numbers of orders waiting just above and below the current market price. This means a trader can execute a substantial buy or sell order without eating through the available orders and forcing the price to move drastically. Conversely, in a shallow market, even a moderate-sized trade can significantly shift the price because there are not enough resting orders to absorb the transaction volume.

How Does Liquidity Depth Work?

Liquidity depth is typically visualized through a Depth Chart. This chart plots the cumulative volume of buy orders and sell orders at various price points.

The Bid Side (Buy Orders): This shows the demand for the asset. A steep bid side indicates strong support, suggesting that many buyers are waiting to purchase the asset if the price drops slightly.
The Ask Side (Sell Orders): This shows the supply. A steep ask side indicates significant resistance, as many sellers are looking to exit their positions as the price rises.

The gap between the highest bid and the lowest ask is known as the bid-ask spread. In deep markets, this spread is usually very narrow. Traders look for depth to minimize slippage, which is the difference between the price they expect to pay and the price at which the trade actually executes.

The Importance of Liquidity Depth

For any participant in the digital asset ecosystem, liquidity depth is a critical factor in risk management. Deep markets offer stability and more predictable execution, which is essential for institutional traders and individuals managing large portfolios. It ensures that the market can handle volatility without dramatic price crashes or extreme price gaps.

In Decentralized Finance (DeFi), depth is often managed through Liquidity Pools. The more assets locked within a pool, the greater its depth, and the more efficiently it can facilitate swaps between different tokens. Understanding depth also allows you to assess whether a particular exchange or protocol is reliable for the size of the trade you intend to make.

Liquidity Pool

A liquidity pool is a collection of digital assets or tokens supplied by platform users and locked in a smart contract to facilitate faster transactions.

What is a Liquidity Pool?

Liquidity describes the ease at which an individual can convert a digital asset into fiat money or other digital assets without causing drastic price swings. Centralized exchanges depend on market makers and order books to maintain liquidity. In contrast, most decentralized finance (DeFi) platforms rely on liquidity pool to operate.

A liquidity pool is a collection of assets in a big digital pile that facilitates automated and permissionless transactions on DeFi platforms. The funds are locked in pieces of self-executing codes called smart contracts. DeFi ecosystems that utilize liquidity pools include decentralized exchanges (DEXs), yield farms, and crypto lending platforms, among others.

Liquidity pools serve the same purpose as market makers – which is to provide market liquidity and depth to ensure users make faster transactions and at fair prices. They replaced traditional order books that relied on buyers and sellers to determine the price for exchanging two assets.

How Do Liquidity Pools Work?

DeXs incentivizes users for providing liquidity to eliminate illiquid market issues, such as slippage. Hence, having more digital assets in a pool shows a platform’s stability and capacity to offer better liquidity. The users pooling their digital assets into liquidity pools are known as liquidity providers (LPs). LPs add an equal value of trading pairs into the pool and earn a fraction of trading fees or crypto rewards.

A DEX requires that a liquidity pool has more than one token to facilitate buying and selling or swapping between two tokens or trading pairs. For instance, when you purchase token X with token Y on a DEX, the supply of token Y in the pool increases while that of X reduces. In return, the price of token Y drops and that of X rises. This means that a token’s availability can influence its price.

To ensure that the pool is constantly liquid, DeFi platforms use different pool pricing algorithms, also known as automated market makers (AMMs), to automatically adjust pricing. Executing trades on AMMs is typically peer-to-contract based as you are trading against the liquidity in the pool rather than a counterparty.

Liquidity pools can also be used for governance, where users pool together their funds to vote for a common cause regarding a protocol’s governance proposals. Another instance is liquidity mining or yield farming, where users provide liquidity to a DEX to generate yield as freshly minted tokens. They are also essential for blockchain-based gaming, on-chain insurance against smart contract risks, and collateralizing minting synthetic assets.

Liquidity Provider

A crypto liquidity provider (LP) offers liquidity by locking their assets on a platform and earn trading fees in return.

What Is a Crypto Liquidity Provider?

Liquidity in cryptocurrency markets refers to the speed and ease with which market participants can buy or sell a digital asset without significantly affecting its price. In other words, it defines a cryptocurrency asset’s availability or popularity in a platform. Cryptocurrency markets, especially decentralized exchanges (DEXs), use liquidity providers to augment the availability of assets for trading. A crypto liquidity provider (LP) is an individual or entity that supplies a decentralized finance platform with capital in the form of cryptocurrency assets.

Typically, DEXs depend on LPs to contribute their digital assets to maintain liquidity. By providing liquidity, LPs ensure that other traders can buy, sell, or swap cryptocurrencies and execute trades smoothly on the platform.

What Are Liquidity Pools?

LPs contribute their tokens through liquidity pools – the reserves for digital assets or capital from multiple users/LPs. The digital assets are locked in a smart contract, pieces of self-executing code.

The purpose of these pools is to provide access to market depth and liquidity, facilitating a continuous flow of buyers and sellers. It also ensures traders execute transactions faster and at fair, stable prices. In simpler words, liquidity pools replace conventional order books, which makes LPs the providers for buy and sell orders.

The more the LPs within a platform’s liquidity pool, the more liquidity the platform users enjoy. Thus, most DeFi platforms, such as DEXs, crypto lending platforms, and yield farms, incentivize LPs to commit their funds. The incentive is a portion of trading fees generated whenever a trade occurs within the pool – when funds flow in and out of the pool. However, LPs are also prone to risks such as impermanent loss, where the asset locked in the liquidity pool is worth less than its present market value.

 

Loan-to-Value (LTV)

Loan-to-Value (LTV) is the ratio between how much you borrow and the value of the collateral you post to secure that loan.

What Is Loan-to-Value (LTV) in Crypto?

Loan-to-Value (LTV) is a risk metric used in both traditional finance and crypto lending. In mortgage lending, for example, it compares a loan amount to the appraised value of the property being purchased. In crypto, it compares the amount you borrow to the current market value of the collateral you deposit. To calculate LTV, you simply divide the loan amount by the collateral value, then multiply by 100.

Unlike traditional loans, which rely on credit scores to assess risk, crypto-backed loans are asset-backed. The lender holds your cryptocurrency as security until the loan is repaid. This model lets you access liquidity without selling your assets, which is why it appeals to long-term holders who want to remain exposed to potential upside.

How Does LTV Change Over Time in a Crypto Loan?

Crypto prices move constantly, which means the value of your collateral can rise or fall while your outstanding principal stays fixed. As a result, your LTV at the start of a loan is rarely your LTV for its entire duration. On most platforms, accrued interest and fees also increase the total amount owed over time, which pushes LTV higher even when collateral value is unchanged.

Most lending platforms set two critical thresholds: a margin call level, where you receive a warning to add collateral or repay part of the loan, and a liquidation level, where the platform automatically sells your collateral to recover the outstanding debt.

Starting with a conservative LTV means the collateral value must fall by a larger percentage before liquidation is triggered, giving you more room to absorb market volatility. Conversely, borrowers who begin with tight LTV ratios leave themselves little margin for error during volatile market conditions. A sharp price drop can move a position from safe to liquidated faster than alerts can be acted on.

LTV and Self-Custody

It’s important to note that when you take a crypto-backed loan through a centralized platform, your assets leave your control for the duration of the loan, introducing counterparty risk.

Keeping your assets in self-custody with a Ledger signer means your private keys remain offline and under your control at all times. At the same time, Ledger Wallet™ gives you visibility over your full portfolio so you can make informed decisions about how much of your holdings to leverage and how much to protect.

LockBit Ransomware

LockBit ransomware is a subclass of malicious software designed to block user access to data on computer systems until they pay a ransom.

What Is LockBit Ransomware?

Ransomware is a malicious software that locks an individual’s computer device, prompting them to pay some sort of ransom to regain access. LockBit is one such ransomware variant. But what exactly is LockBit ransomware?

Originally known as ABCD ransomware, LockBit ransomware encrypts victims’ data or files on infected computer systems, allowing the cyberattackers to demand ransom payment in exchange for decryption. The attackers also threaten to leak the data to the public if their demands are not met.

The cybercriminals behind this ransomware share the same name – LockBit. The group offers it as a ransomware-as-a-service (RaaS) application. The affiliates can use it to perform ransomware attacks in exchange for a cut of ransom revenue, subscription fees, or upfront payment.

Cyberattacks using Lockbit code first appeared in September 2019, where it renamed files with a “.abcd” extension. Later versions adopted the “.lockbit” file extension, giving it its latest moniker. Its associated attacks often target enterprises and organizations rather than individuals. In addition, they often demand payment in the form of cryptocurrencies.

How Does It Work?

The attackers first identify organizations or enterprises whose operations will be greatly affected by the disruption. This is aimed at exerting pressure on the victims, forcing them to concede to the attacker’s demands.

They then use phishing emails, software vulnerabilities, or stolen credentials to gain access to the target’s computer systems. The attackers may also recruit disgruntled employees, who are paid to launch the attack from the inside or offer account credentials.

Once the attackers have gained access, they use tools like Windows PowerShell and Server Message Block (SMB) to spread and identify high-value targets. The ransomware also self-propagates, meaning that it spreads on its own, throughout the system undetected to find additional accessible hosts.

Moreover, the malware is programmed to gain account privileges using post-exploitation tools. Such access allows attackers to disable security programs and recovery tools in preparation to encrypt targeted files.

During the encryption stage, a ransomware payload encrypts the files with a note in every folder requesting ransom. This restricts the victim from regaining access to their computer systems, leaving ransom payment as the only viable option.

Other versions of the malware are deployed to exfiltrate targeted files to an external server. The exfiltration allows the hackers to extort victims, often threatening to publish sensitive information on a leak site if they do not comply.

 

Long Position

What Is a Long Position in Crypto?

A long position is one of the two fundamental stances a trader can take in any market. Going long simply means buying an asset with the expectation that its price will be higher in the future.

This is the most intuitive form of crypto trading and the default position for most holders. Buying and holding Bitcoin or Ethereum in a self-custody wallet is, in the broadest sense, a long position.

For example, if you buy Bitcoin at ＄80,000 and sell it at ＄100,000, you have profited from a long position. If the price falls instead, you incur a loss.

How Do Traders Open Long Positions in Crypto?

The simplest way to go long is to buy an asset and hold it. You own the asset outright and profit directly from price appreciation.

More advanced traders use derivatives to go long with leverage. On platforms offering perpetual futures or margin trading, you can open a long position larger than your actual capital by borrowing funds. A 10x leveraged long on ＄1,000 gives you ＄10,000 of exposure.

Gains are amplified, but so are losses. If the price moves against you far enough, the position gets liquidated, and your collateral is lost.

Long Vs. Short Positions

A long position profits from rising prices, whereas a short position profits from falling prices. Traders who believe an asset is overvalued will short it, while those who see upside will go long.

In volatile crypto markets, both positions carry significant risk, and leveraged positions on either side can be wiped out quickly by sharp price swings.

 

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