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Glossary

A list of words and terms relating to the BitFlow documentation.

Automated Market Maker (AMM)

A type of decentralized trading protocol that relies on mathematical formulas to set the price of an asset. Instead of using an order book like traditional exchanges, AMMs use liquidity pools where users can deposit their assets. These pools help facilitate trades and determine prices based on the ratio of assets in the pool, enabling instant and frictionless trading without the need for counterparties.

Decentralized Exchange (DEX)

A trading platform that operates without a central authority, allowing users to trade cryptocurrencies directly with one another. DEXs rely on blockchain technology and smart contracts to facilitate and verify transactions, providing increased transparency and potentially reduced counterparty risks.

StableSwap

A type of decentralized exchange mechanism designed primarily for stablecoins or assets with relatively similar values. StableSwap utilizes specialized algorithms to offer lower slippage and reduced fees for swaps between such assets, making it a preferred choice for traders dealing with stablecoins or pegged assets.

Liquidity Provision

The act of supplying assets, often in the form of cryptocurrency or tokens, to a market or pool to facilitate trading and reduce price volatility. By providing liquidity, participants can earn transaction fees or rewards based on the platform's design and their share in the liquidity pool. Liquidity provision is a fundamental component of decentralized exchanges and automated market makers.

Liquidity Pool

A collection of funds locked in a smart contract, used to facilitate decentralized trading on platforms like automated market makers (AMMs). Users deposit tokens into these pools, providing liquidity for others to trade against. In return for their contribution, liquidity providers often earn transaction fees or other rewards.

Liquidity Provider Token (LP)

A token that represents a liquidity provider's share in a liquidity pool on a decentralized exchange or automated market maker. When users supply assets to a liquidity pool, they receive LP tokens in return. These tokens can be used to reclaim the supplied assets and any potential rewards. The value and quantity of LP tokens correlate with the amount of liquidity provided and the pool's overall size.

Base Pool

A primary or foundational liquidity pool that's used as a standard or reference for other activities or pools. These pools often contain major assets or stablecoins and serve as a central hub, ensuring deep liquidity and reduced slippage.

Metapool

A specialized pool where one of the tradable assets is the LP token from another pool, known as the base pool. Metapools are designed to prevent liquidity fragmentation and enhance the overall trading and liquidity provision experience.

Amplification Coefficient

A parameter integral to BitFlow's StableSwap invariant design that determines the extent of deviation from the constant-product invariant. This coefficient strikes a balance between the stability of asset prices and the liquidity available in trading pairs. By fine-tuning the amplification coefficient, the system can achieve optimal price stability and trading efficiency, ensuring a seamless experience for traders and liquidity providers alike.

Stablecoin

A type of cryptocurrency designed to maintain a stable value by pegging it to an underlying asset or basket of assets, such as a specific amount of a traditional currency, a commodity, or a combination of different assets. Stablecoins are commonly used in the cryptocurrency market to mitigate volatility and as a means of exchange, store of value, or unit of account.

Underlying Coin

A token deposited into a protocol, which is subsequently represented by another token, known as the wrapped coin. While the wrapped coin circulates and interacts within the protocol, the underlying coin remains the foundational asset. The original token can be reclaimed by redeeming the wrapped coin.

Wrapped Coin

A token that represents the deposit of another token (the underlying coin) within a specific protocol. By "wrapping" the original token into this new format, it can seamlessly operate within the protocol's environment, ensuring interoperability and retaining the value and ownership of the underlying asset.

BRC-20 Token Standard

A token standard developed for the Bitcoin blockchain, enabling the creation, management, and transfer of digital assets or tokens within the Bitcoin network. The standard uses ordinal inscriptions to facilitate the minting and transferring of fungible tokens. While inspired by the ERC-20 structure, BRC-20 is tailored to Bitcoin's unique architecture.

Synthetic Asset

A tokenized representation of a real-world asset (e.g., stocks, commodities, or other cryptocurrencies) on the blockchain. These tokens derive their value from the assets they represent, allowing users to gain exposure to those assets without owning or storing the actual underlying asset. Some examples of synthetic assets used by BitFlow include xBTC, sBTC, or sUSDT.

Smart Contract

A self-executing contract with the terms of the agreement directly written into lines of code. Deployed on a blockchain, smart contracts automatically enforce and execute predefined actions when certain conditions are met, eliminating the need for intermediaries.

Real Yield

The tangible earnings or rewards obtained from participation in a DeFi platform or protocol. Real yield reflects the genuine return on investment derived from trading activities, fees, or other intrinsic mechanisms.
Last modified 1mo ago