DeFi and Smart Contract Glossary

A smart contract that holds token reserves and enables trading without an order book. Prices are determined algorithmically based on the ratio of tokens in the pool.

The pricing invariant x * y = k, where x and y are token reserves and k is a constant. When one token is bought, the other's reserve increases to maintain k.

A smart contract holding paired token reserves that enables trading. Liquidity providers deposit equal value of two tokens and receive LP tokens representing their share.

A user who deposits tokens into a liquidity pool to facilitate trading, earning a share of trading fees in return. LPs take on impermanent loss risk in exchange for fee income.

A token minted to liquidity providers representing their share of a pool. LP tokens can be burned to withdraw the underlying tokens plus accumulated fees.

The difference between holding tokens in a liquidity pool versus holding them in a wallet. When the price ratio of pooled tokens changes, the pool rebalances, and LPs end up with m...

The difference between the expected price of a trade and the actual execution price. In AMMs, larger trades relative to pool size cause more slippage because each unit bought moves...

Time-Weighted Average Price oracle. An on-chain price feed calculated from cumulative price accumulators updated on every trade.

An AMM design (introduced by Uniswap V3) where liquidity providers can allocate capital to specific price ranges instead of across the entire curve.

A feature of Uniswap V2 where tokens are sent to the borrower before payment is verified. The borrower can use the tokens, then either return them or pay with the other token, all...

An exploit where a malicious contract calls back into the vulnerable contract before the first execution is complete, manipulating state that hasn't been updated yet.

An exploit that uses uncollateralized flash loans to temporarily manipulate prices, governance votes, or oracle readings within a single transaction.

Observing a pending transaction in the mempool and submitting a transaction with a higher gas price to execute before it.

A condition that must always be true throughout a contract's execution. In Uniswap V2, the key invariant is x * y >= k after every swap.

Checks-Effects-Interactions pattern. A Solidity best practice where you first validate inputs (Checks), then update state (Effects), then make external calls (Interactions).

Exploiting a price oracle to make the protocol act on incorrect price data. Spot price oracles (single-block readings) are trivially manipulable via flash loans.

A design pattern where one contract (the Factory) creates and registers other contracts (Pairs/Pools). In Uniswap V2, the Factory uses CREATE2 to deploy Pair contracts with determi...

An EVM opcode that deploys contracts to deterministic addresses based on the deployer address, a salt, and the contract bytecode.

A smart contract architecture where users interact with a proxy contract that delegates calls to a separate implementation contract.

An architecture pattern separating immutable, security-critical logic (Core: Pair, Factory) from replaceable user-facing contracts (Periphery: Router).

A token that deducts a fee on every transfer, meaning the recipient receives less than the sender sent. These tokens break pre-calculated swap amounts because the actual tokens arr...

Income generated by a protocol's core operations, distinct from token price appreciation. In Uniswap V2, protocol revenue comes from an optional 0.05% fee (1/6th of the 0.

A schedule that releases tokens to holders over time rather than all at once. Prevents early investors and team members from selling immediately after launch.

A token that grants holders voting rights over protocol decisions. Can cover parameter changes (fee rates, collateral factors), treasury allocation, and upgrade proposals.

The total value of assets deposited in a DeFi protocol's smart contracts. TVL is the most common metric for measuring protocol adoption, but it can be misleading: incentivized liqu...

An EVM gas optimization where multiple state variables are packed into a single 32-byte storage slot. Reading one slot costs 2,100 gas.

A standard that allows token approvals via off-chain signatures instead of on-chain transactions. Users sign a permit message, and anyone can submit it on-chain.

A Solidity 0.8+ block where arithmetic overflow/underflow checks are disabled. Used when overflow is intentional (e.g.

A technique for representing fractional numbers in Solidity (which has no native floating-point). Uniswap V2 uses UQ112.