Automated Market Maker

An automated market maker is a smart contract that holds liquidity reserves. Users can trade against these reserves at prices determined by a fixed formula. Anyone may contribute liquidity to these smart contracts, earning pro-rata trading fees in return.

Asset

While a digital asset can take many forms, the Razor DEX Protocol supports fungible token pairs, and represents a position in the form of fungible tokens too.

Constant Product Formula

The automated market making algorithm used by Razor DEX AMM. That is x*y=k.

Flash Swap

A trade that uses the tokens purchased before paying for them.

Invariant

The “k” value in the constant product formula X*Y=K

Liquidity Provider / "LP"

A liquidity provider is someone who deposits tokens into a given liquidity pool. Liquidity providers take on price risk and are compensated with trading fees.

Liquidity

Digital assets that are stored in a Razor DEX pool contract, and are able to be traded against by traders.

Price Impact

The difference between the mid-price and the execution price of a trade.

Protocol Fees

Fees that are rewarded to the protocol itself, rather than to liquidity providers.

Reserves

The liquidity available within a pair. This was more commonly referenced before concentrated liquidity was introduced.

Slippage

The amount the price moves in a trading pair between when a transaction is submitted and when it is executed.

Spot Price

The current price of a token relative to another within a given pair.

Swap Fees

The fees collected upon swapping which are rewarded to liquidity providers.