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 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.