Glossary

Short definitions that stay readable.

AMM

Automated Market Maker

Prices come from pool reserves and an algorithm, not an order book.

Token reserves for swaps

A smart contract holding a token pair; LPs earn fees.

Execution tolerance

Maximum acceptable difference between quote and execution price.

How much you move price

Large trades vs thin liquidity cause larger impact.

Permission to spend tokens

ERC-20 approval lets a contract transfer your token for swaps.

Transaction ordering profit

Can lead to worse execution (sandwiching) in some scenarios.

The contract that finds and executes the swap route

Routing can use multiple pools (“multi-hop”) to get a better price than a single pool.

A swap that goes through more than one pool

Example: Token A → WETH → Token B. Extra hops can improve price but may add complexity and gas.

An ERC‑20 representation of ETH

Many ERC‑20 pools use WETH because smart contracts interact more consistently with ERC‑20 tokens than with native ETH.

The percentage paid to LPs on each swap

In v3, pools can exist at multiple fee tiers for the same pair, matching different volatility profiles.

Discrete price boundaries used in v3

A v3 position is active only inside its range. Outside the range, it holds mostly one asset and earns no swap fees.

Moves assets between networks

Bridging adds steps and risk. Always verify the official bridge domain and confirm the destination network in your wallet.