Glossary
A
Automated Market Maker
An automated market maker (AMM) 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 trading fees in return.
Asset
A token which can be traded on the DEX.
API
An API is like a messenger that helps different software systems communicate and share information with each other. It's a set of rules that allows applications to talk to each other and exchange data.
APR
Annual Percentage Rate, a measure of the yearly interest or cost associated with borrowing money or using credit.
APY
Annual Percentage Yield, a measure of the yearly interest earned or gained on an investment or savings account.
B
Blockchain
A digital ledger that records transactions across multiple computers in a decentralized and transparent manner, providing secure and tamper-proof records.
Bitcoin (BTC)
The first and most well-known cryptocurrency, a decentralized digital currency that operates on a blockchain and enables peer-to-peer transactions.
Block
A collection of transactions that are bundled together and added to the blockchain, forming a permanent record.
Bridge
A platform or protocol that enables the transfer of digital assets (cryptocurrencies) between different blockchain networks.
Burning
The process of permanently removing or destroying a certain amount of cryptocurrency tokens from circulation, typically done to manage supply or increase value.
C
Constant Product Formula
The automated market-making algorithm used by Spectrum.DEX, x*y=c. where x and y are deposits on tokens X and Y respectively and c is their product which has to remain constant after swap operations. CFMMs provide liquidity across the entire price range.
Concentrated Liquidity
The liquidity which is allocated within a determined price range.
CEX
Centralized Exchange, a cryptocurrency exchange platform where transactions are facilitated by a centralized authority or organization, typically holding custody of users' funds.
Custodial
Refers to a system where a third-party holds and manages assets on behalf of users.
D
Deposit
Used to deposit a token pair into the DEX to receive LP tokens and earn on protocol fees.
DeFi
Short for Decentralized Finance, it refers to financial applications built on blockchain technology that aim to provide open and permissionless access to financial services.
DEX
Decentralized Exchange, a cryptocurrency exchange that operates on a decentralized platform, allowing users to trade directly with each other without the need for an intermediary.
Decentralization
The distribution of control and decision-making across a network of participants rather than being controlled by a central authority.
E
Execution Fee
Fees that are charged for execution by the AMM bots.
EVM
Ethereum Virtual Machine, a runtime environment that executes smart contracts on the Ethereum blockchain.
F
Farming
A process in which cryptocurrency holders provide liquidity to DeFi protocols and receive rewards in return.
Fiat
Government-issued currency, such as the US Dollar or Euro, that is not backed by a physical commodity like gold or silver.
G
Gas
A unit of measurement for the computational effort required to execute transactions and smart contracts on the Ethereum network.
H
Hash
A mathematical function that takes an input and produces a fixed-size string of characters, used to ensure data integrity and secure transactions.
Hash rate
The computational power of a blockchain network, measuring the speed at which miners or validators can solve complex mathematical problems.
I
Interface
A user-friendly platform or program that allows users to interact with a system or application.
J
K
KYC
Know Your Customer, a process used by businesses and financial institutions to verify the identities of their customers.
L
Liquidity
Digital assets that are stored in a pool contract and can be traded against by traders.
Liquidity Provider
A liquidity provider is someone who deposits tokens into a liquidity pool. Liquidity providers take on price risk and are compensated with trading fees.
Liquidity Pool
A pool of funds locked in a smart contract that enables trading and liquidity for decentralized exchanges.
Layer 2
A set of off-chain solutions (separate blockchains) built on top of layer 1s that reduce bottlenecks with scaling and data
M
Miner Fee
Fees that are rewarded to miners for confirming the transactions.
Mempool
Short for Memory Pool, it is a data structure that holds pending transactions in a blockchain network before they are confirmed.
N
Nitro
Maximum execution fee multiplier.
Network Fee
A fee paid by users to include their transactions in a blockchain network and incentivize miners or validators.
Non-custodial
Refers to a system where users have full control and ownership of their assets without relying on a third party.
O
Order
A transaction a user submits to a DeFi protocol.
Orderbook
An order book system is similar to what you will see on traditional centralized exchanges. It shows buyers and sellers with amounts and the value of bids on one table.
Output
When performing a swap, this is the range of expected output you will receive depending on slippage.
P
Pair
A pool containing 2 tokens that are available to trade against each other.
Protocol fee
Fees that liquidity providers are rewarded with. Charged in assets of a pool.
Proof-of-stake
A consensus mechanism in which validators are chosen to create new blocks and secure a blockchain network based on the number of tokens they hold and "stake.”
Proof-of-work
A consensus mechanism where miners must solve complex mathematical puzzles to validate and add new blocks to a blockchain network.
Q
R
Redeem
An act of reclaiming liquidity provided to a liquidity pool earlier, plus protocol fees.
Refund
Cancellation of an order which still needs to be settled.
S
Smart contract
Swap
An operation that trades one asset for another using an AMM liquidity pool
Slippage
The amount the price moves in a trading pair between when a transaction is submitted and when it is executed.
Staking
The act of holding and locking up cryptocurrency tokens in a wallet to support network operations and earn rewards.
Stablecoin
todo
T
Transaction
An exchange of data or value between participants on a blockchain network, typically involves the transfer of cryptocurrency.
TVL
Total Value Locked, a measure of the total funds (cryptocurrency) locked in a specific protocol or smart contract in the DeFi ecosystem.
U
UTxO
Unspent Transaction Output, a model used in some blockchain networks, including Bitcoin, Cardano and Ergo to keep track of the balance and ownership of cryptocurrency.
UI Fee
Fees that the UI provider is rewarded with.
V
Validator
A participant in a blockchain network responsible for validating transactions and maintaining the integrity of the network.
W
Web3
The next generation of the internet, aiming to create a more decentralized and user-centric web experience using blockchain technology.
White paper
A document that explains the concept, technology, and implementation details of a cryptocurrency or blockchain project.
X
Y
Yield Farming
A process in which cryptocurrency holders provide liquidity to DeFi protocols and receive rewards in return.
Yield Farming pool (program)
A liquidity pool in a DeFi protocol where users can deposit their funds to earn rewards, typically in the form of additional tokens.
Z
ZK-rollup
A layer 2 scaling solution that aggregates multiple transactions into a single proof, enabling faster and more scalable blockchain transactions while maintaining security and decentralization.