Glossary
Automated Market Maker
An automated market maker is a smart contract that holds liquidity reserves. Users can trade against these reserves at prices determined by a fixed formula. Anyone may contribute liquidity to these smart contracts, earning pro-rata trading fees in return.
Concentrated Liquidity
Liquidity that is allocated within a determined price range.
Constant Product Formula#
The automated market making algorithm given by product formula .
Liquidity Provider / "LP"
A liquidity provider is someone who deposits tokens into a given liquidity pool. Liquidity providers take on price risk and are compensated with trading fees.
Liquidity
Digital assets that are stored in a Uniswap pool contract, and are able to be traded against by traders.
Pool
A contract that pairs two assets. Different pools may have different fees despite containing the same token pair.
Position
An instance of liquidity defined by upper and lower tick. And the amount of liquidity contained therein.
Price Impact
The difference between the mid-price and the execution price of a trade.
Protocol Fees
Fees that are rewarded to the protocol itself, rather than to liquidity providers.
Range
Any interval between two ticks of any distance.
Range Order
An approximation of a limit order, in which a single asset is provided as liquidity across a specified range, and is continuously swapped to the destination address as the spot price crosses the range.
Slippage
The amount the price moves in a trading pair between when a transaction is submitted and when it is executed.
Swap Fees
The fees collected upon swapping which are rewarded to liquidity providers.
Tick Interval
The price space between two nearest ticks.
Tick
The boundaries between discrete areas in price space.