Automated Market Maker (AMM)
An automated market maker is a smart contract that holds on-chain liquidity reserves. Users can trade against these reserves at prices set by an automated market making formula.
Tokens are fungible assets created by a smart contract in the blockchain. Tokens do not have denomination but do have a contract address.
Native tokens (sometimes referred to as "coin") refers to the fungible assets that live natively in the blockchain and are used to pay for fees and incentivize nodes for validation and do not have contract addresses. Native tokens have denomination.
CW20 refers to the token standard or convention for the features a smart contract needs to create a fungible token.
Inter-Blockchain Communication (IBC) protocol allows blockchains to transfer assets and data between them as well as other interactions in a decentralized manner.
Tokens that can be transferred between different blockchains through the IBC protocol.
A smart contract that is able to deploy a child smart contract for any trading pair. Assets in this pair may be of types CW20 token, IBC token or Native in any combination.
A smart contract deployed from the Factory that enables trading between two assets which can be native tokens, IBC tokens, or CW20 tokens. Holds reserves of two unique assets and enforces rules around depositing and withdrawing them. On deposits for the liquidity pool, the Pair contract emits Liquidity Provider tokens representing the share of the pool for the depositor.
Liquidity providers are those who provide an equivalent value of two assets into the liquidity pool to a pair contract. Liquidity providers take on price risk and are compensated with fees.
Liquidity within a trading pair is pooled across all liquidity providers. When a pool contract is created, its balances of each token are 0. Someone must seed it with an initial deposit of each token. This first LP is the one who sets the initial price of the pool.
The price paid in the native token of a blockchain for the transaction to be included in a block and confirmed by the validators.
Liquidity Provider Tokens (LP Tokens)
Whenever liquidity is deposited into a pool, unique tokens known as Liquidity Provider tokens are minted and sent to the provider's address by default. They represent a given provider's contribution to the pool. The amount of LP tokens the provider is given depends on the proportion of the liquidity pool that belongs to them.
They are represented as such:
The price range in which users can trade tokens at a given moment. This is the ratio of the two CW20 token reserves.
The difference between the mid-price and the execution price of a trade. This is determined by the size of the trade compared to the size of the pool.
The percentage of price difference or price movement a user is willing to take on which happens from the moment the user submits a transaction to the moment the transaction is executed.
A trade that occurs in a single execution that uses the tokens being purchased before paying for them.
Total Value Locked (TVL)
Total value locked (TVL) is the sum of all tokens staked, loaned, deposited in a pool. Importantly, it doesn't reflect the yield that these deposits are expected to earn. It only means the current value of the deposits themselves.
Annual Percentage Rate (APR)
APR is the annual rate of return, expressed in percentages. Also called simple interest, this APR gives users a figure that can be easily compared to the rates of other protocols.
Light Client Daemon (LCD)
The LCD is essentially a REST server that exposes a set of endpoints that can be interacted with to submit transactions, query data, etc.