Glossary (common terms)
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.
Asset
While a digital asset can take many forms, Yowie Finance supports ERC-20 token pairs and represents a position in the form of an NFT (ERC-721).
Concentrated Liquidity
Liquidity that is allocated within a determined price range.
Constant Product Formula
The automated market-making algorithm defined as x*y = k.
Core
Smart contracts that are considered foundational and are essential for the protocol to exist. Upgrading Core requires deploying a new set of smart contracts and is treated as a new version of the protocol.
DeFi
Decentralized finance. An umbrella term for peer-to-peer financial services on public blockchains.
ERC20
ERC-20 tokens are fungible tokens on Ethereum. Yowie Finance supports standard ERC-20 implementations.
Factory
A smart contract that deploys a unique pool contract for any ERC-20/ERC-20 trading pair.
Flash Swap
A trade that uses the tokens purchased before paying for them.
Gas Fees
Transaction fees paid to incentivize validators to process and verify transactions on a blockchain network. Higher fees generally confirm faster.
Invariant
The “k” value in the constant product formula x*y = k.
Impermanent Loss
A temporary loss incurred when the price of tokens in a liquidity pool changes compared to simply holding the assets.
Liquidity Provider / “LP”
An address that deposits ERC-20 tokens into a liquidity pool. LPs take on price risk and are compensated with trading fees.
Liquidity
Digital assets that are stored in a Yowie Finance pool contract and are tradable by users.
Mid Price
The price between the available buy and sell prices. It is the ratio of the two ERC-20 token reserves available at the current active tick.
Non-Fungible Token (NFT)
In the context of liquidity provisioning, NFTs represent unique positions in a liquidity pool and cannot be swapped directly like standard ERC-20 tokens.
Observation
An instance of historical price and liquidity data for a given pool.
Oracle
A system that provides real-time and historical price data to decentralized platforms, allowing smart contracts to reference external price information.
Pair
A smart contract that enables trading between two ERC-20 tokens. These are commonly referred to as pools.
Periphery
External smart contracts that are useful but not required for Yowie Finance to exist. New periphery contracts can be deployed without migrating liquidity.
Permissionless Access
The ability to access and interact with a decentralized platform without approval or gatekeepers. Anyone can provide liquidity, trade, or create markets.
Pool
A contract that pairs two ERC-20 assets. Different pools may have different fees despite containing the same token pair.
Position
An instance of liquidity defined by an 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.
Reserves
The liquidity available within a pool.
RPC (Remote Procedure Call)
A protocol that lets a program execute a procedure on a remote server as if it were local. In blockchain, an RPC endpoint allows applications to interact with a node for actions like querying balances, fetching transactions, or broadcasting transactions.
Slippage
The amount the price moves between when a transaction is submitted and when it is executed.
Spot Price
The current price of a token relative to another within a given pool.
Stablecoin
A cryptocurrency that targets a stable value by pegging to an external reference.
Swap (Trading)
The exchange of one asset for another in a liquidity pool on a decentralized exchange. Swaps occur directly with the pool, not via an order book.
Swap Fees
Fees collected upon swapping that are rewarded to liquidity providers.
Tick Interval
The price space between two nearest ticks.
Tick
The boundaries between discrete areas in price space.
Time-Weighted Average Price (TWAP)
A pricing mechanism that calculates the average price of an asset over a specified period to smooth volatility and reduce manipulation risk.