# Glossary

## Glossary

**AMM (Automated Market Maker)**: A decentralized protocol used on DeFi platforms to automate liquidity provision for trading pairs. AMMs remove the need for traditional market makers by using smart contracts to manage liquidity.

**Capital Efficiency**: A measure of how effectively capital is used to generate returns. Greater capital efficiency means a trader is maximizing the potential return on their invested capital.

**Slippage**: The difference between the expected trade price and the price at which the trade actually executes. Slippage is common in fast-moving markets or when liquidity is low.

**Concentrated liquidity**: Liquidity that is focused within a specific price range, rather than being spread across the entire market. This approach allows for greater liquidity depth where it’s most needed, leading to higher trading volumes and narrower spreads.

**Custom Liquidity Ranges**: Specific price intervals selected by liquidity providers to focus their capital. These ranges are set according to market conditions and ensure liquidity is available in targeted areas for trading.

**Impermanent Loss**: A temporary loss that occurs when the price of assets in a liquidity pool changes after a liquidity provider deposits their tokens. This loss happens when the token price deviates from its original value in the pool, impacting the LP’s returns.

**NFT LP (Non-fungible Liquidity)**: A unique contract that represents a liquidity provider’s position, including the associated data and fees. In TONCO NFT LPs replace traditional LP tokens.

**Price Impact**: Unfavorable change in price. If you are swapping in a pool with very low liquidity, you may receive a very poor price for your swap.

**Price Range**: The defined range within which a liquidity provider or trader operates. It represents the price window where liquidity is concentrated and trades are executed.

**Dynamic Fees**: A fee structure that adjusts based on the liquidity and market conditions within a specific pool. This flexible approach incentivizes liquidity providers to contribute when liquidity is low.

**Trading Tick**: The smallest possible price increment (up or down) for an asset. It defines the granularity of price changes within an AMM system.

**Tick Spacing**: Tick spacing sets the intervals between price points (or “ticks”) in a liquidity pool. For example, with a tick spacing of 8, each tick is 0.08% apart from the next price level, while a spacing of 128 means each tick is 1.28% apart.

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