Glossary
Welcome to the OctoSwap Glossary! This page is your quick reference for understanding important terms, abbreviations, and concepts used throughout the app and documentation. Whether you're new to DeFi or just need a refresher, you'll find clear explanations below.
A
AMM (Automated Market Maker): A type of smart contract that allows for automatic, permissionless trading between tokens using liquidity pools instead of traditional order books.
APR (Annual Percentage Rate): The yearly return rate earned from providing liquidity or staking tokens.
APY (Annual Percentage Yield): The real rate of return earned on an investment, taking into account the effect of compounding interest.
Approval: Permission granted to a smart contract to spend your tokens on your behalf.
Arbitrage: The practice of buying and selling the same asset on different markets to profit from price differences.
B
Badge: Digital achievements earned through platform participation, displayed on user profiles and leaderboards.
Block: A collection of transactions that are grouped together and added to the blockchain network.
Blockchain: A distributed digital ledger that records transactions across multiple computers in a secure, transparent way.
Block Explorer: An online tool for viewing transactions, addresses, and contract activity on a blockchain network.
Bonding Curve: A mathematical formula that determines the price of a token based on its supply.
Bridge: A tool or protocol that lets users move assets between different blockchains.
C
Capital Efficiency: The ability to maximize returns while using the minimum amount of capital required.
Chain ID: A unique number identifying a specific blockchain network.
CL AMM (Concentrated Liquidity AMM): An AMM where liquidity providers can select a custom price range, concentrating their capital and potentially earning more fees.
Constant Product Formula: The mathematical model (x × y = k) used by AMMs to determine token prices and execute trades.
Cryptocurrency: Digital or virtual currency secured by cryptography and operating on blockchain networks.
D
Decentralization: The distribution of power and control away from a central authority to a network of participants.
DeFi (Decentralized Finance): Financial services built on blockchain technology that operate without traditional intermediaries like banks.
DEX (Decentralized Exchange): A platform for trading cryptocurrencies directly on-chain, without intermediaries.
DAO (Decentralized Autonomous Organization): A blockchain-based organization governed by smart contracts and community voting.
E
ERC-20: A technical standard for fungible tokens on the Ethereum blockchain and compatible networks.
EVM (Ethereum Virtual Machine): The runtime environment for smart contracts that enables blockchain compatibility across different networks.
F
Faucet: A service that distributes free testnet tokens for users to experiment with blockchain applications.
Fee Tier: The percentage fee taken on each trade, which is distributed to liquidity providers. Different pools may offer different fee tiers.
Flash Loan: A type of loan that must be borrowed and repaid within the same transaction block.
Front-running: The practice of placing a transaction ahead of another to profit from anticipated price movements.
G
Gas: The fee required to execute transactions and smart contract operations on a blockchain network.
Gasless: Transactions that don't require users to pay gas fees directly, often subsidized by the protocol.
Governance Token: A token that gives holders voting rights on protocol decisions and upgrades.
I
Impermanent Loss: The temporary loss of value experienced by liquidity providers due to price changes between the tokens in a pool.
In-Range: A concentrated liquidity position where the current market price falls within your selected price range.
L
Legacy Pool: Traditional AMM pools that distribute liquidity evenly across all price ranges using the constant product formula.
Limit Order: An order to buy or sell a token at a specific price or better.
Liquidity: The availability of tokens in a pool that enables smooth trading without significant price impact.
Liquidity Mining: The process of earning rewards by providing liquidity to DeFi protocols.
Liquidity Provider (LP): A user who deposits tokens into a pool to facilitate trading and earns a share of trading fees.
LP Token: A token representing your share of a liquidity pool, used for redeeming your portion plus earned fees.
LST (Liquid Staking Token): Tokens representing staked assets that can still be traded or used in DeFi while earning staking rewards.
M
Mainnet: The live, production version of a blockchain network where real transactions and value transfers occur.
Mempool: A waiting area for unconfirmed transactions before they are included in a block.
MEV (Maximal Extractable Value): Profits that can be extracted by reordering or manipulating transactions within a block.
Multi-Hop Swap: A trade that routes through multiple token pairs to achieve the best price.
N
NFT (Non-Fungible Token): A unique digital token that represents ownership of a specific asset or position.
O
OCTO ID: A unique identifier for OctoSwap users, enabling referrals, badges, and leaderboard tracking.
Oracle: A service that provides external data to smart contracts on the blockchain.
Order Book: A list of buy and sell orders for a particular asset organized by price level.
Out-of-Range: A concentrated liquidity position where the current market price has moved outside your selected price range.
P
Permit2: A token approval system that enables gasless approvals and enhanced security features.
Pool: A smart contract holding tokens to facilitate trading.
Position: Your active stake or investment in a liquidity pool, representing your share of the pool's assets.
Price Impact: The difference between the expected price of a trade and the executed price, often caused by trade size relative to pool liquidity.
Protocol: A set of rules and smart contracts that govern how a DeFi application operates.
R
Real Yield: Returns generated from actual revenue and fees rather than token emissions or inflation.
Rebalancing: The process of adjusting portfolio allocations to maintain desired asset ratios.
Referral: A system that rewards users for inviting others to join the platform.
Router: The smart contract or backend system that finds the best path for your swap, often splitting or routing trades across multiple pools.
RPC (Remote Procedure Call): A network endpoint that allows applications to communicate with blockchain networks.
S
Sandwich Attack: A type of MEV attack where malicious actors place transactions before and after a user's trade to extract profit.
Slippage: The acceptable difference between the quoted and executed trade price, set by the user to manage risk.
Slippage Tolerance: The maximum percentage difference a user is willing to accept between expected and actual trade execution prices.
Smart Contract: Self-executing code on the blockchain that manages trades, pools, and protocol logic.
Smart Router: An advanced routing system that automatically finds the best execution path across multiple liquidity sources.
Stablecoin: A cryptocurrency designed to maintain a stable value relative to a reference asset like the US dollar.
Swap: The process of exchanging one cryptocurrency for another through a decentralized exchange.
T
Testnet: A separate blockchain network used for testing and development without using real money or assets.
Tick: The smallest price increment in concentrated liquidity pools, used to define price ranges.
Token: A digital asset created and managed on a blockchain network.
Tokenomics: The structure and economic design of a protocol's native token—covering distribution, utility, and incentives.
Trade: The act of buying or selling cryptocurrencies on an exchange platform.
TVL (Total Value Locked): The total amount of assets deposited in a DeFi protocol or pool.
TWAP (Time-Weighted Average Price): A trading algorithm that calculates the average price of an asset over a specified time period.
V
Volatile/Volatility: The degree of price fluctuation in cryptocurrency markets over time.
W
Wallet: Software or hardware that stores your private keys and allows you to interact with blockchain networks.
WETH/WMON: Wrapped versions of native tokens (ETH/MON) that can be used in smart contracts and DeFi protocols.
Y
Yield: The return or profit earned from providing liquidity, staking, or other DeFi activities.
Yield Farming: The practice of moving funds between different DeFi protocols to maximize returns.