Reference
DeFi & Uniswap glossary
Short, plain-English definitions of the terms you'll meet across our guides. Educational only — none of this is advice.
- DEX (decentralized exchange)
- A way to swap tokens directly on a blockchain through smart contracts, with no company holding your funds. See what is a DEX.
- CEX (centralized exchange)
- A company-run exchange that holds your funds, usually requires an account and identity checks, and matches trades inside its own systems.
- AMM (automated market maker)
- A smart contract that holds a pool of two tokens and prices swaps by formula instead of matching buyers and sellers. See how AMMs work.
- Constant-product formula (x · y = k)
- The rule many AMMs use: the product of the two token reserves stays constant through each swap (before fees), which sets the price.
- Liquidity pool
- A smart contract holding reserves of two tokens that traders swap against. See liquidity pools and LP tokens.
- Liquidity provider (LP)
- Someone who deposits a pair of tokens into a pool, supplying the reserves traders swap against.
- LP token
- A token issued to a liquidity provider that represents a proportional share of a pool; redeeming it returns a share of the current reserves.
- Reserves
- The amounts of each token held in a pool. Their ratio determines the swap price.
- Price impact
- The change in a pool's price caused by your own trade; it grows with trade size relative to pool depth. See slippage & gas.
- Slippage
- The difference between the price you expected and the price at which a swap actually executes.
- Slippage tolerance
- A setting that defines how far the executed price may move from your quote before a swap is automatically cancelled.
- Gas
- A measure of the computational work a blockchain transaction requires; you pay a fee for it that varies with network demand.
- Layer 2
- A separate network that processes transactions and settles back to a base chain like Ethereum, generally with lower fees.
- Arbitrage
- The process by which independent participants trade away price differences between venues, pulling a pool's price back toward the wider market.
- Impermanent loss
- The value gap between providing liquidity and simply holding the two tokens, caused by their prices diverging. See DeFi risks.
- TVL (total value locked)
- A descriptive measure of how much value sits in a pool or protocol at a given moment. It indicates size, not safety.
- Concentrated liquidity
- A design (introduced in Uniswap v3) where liquidity providers allocate tokens within a chosen price range. See Uniswap v2 vs v3 vs v4.
- Fee tier
- One of several preset swap-fee levels a pool can use, suited to how volatile a pair tends to be.
- Hook
- An optional plug-in contract (introduced in Uniswap v4) that runs custom code at defined moments, such as before or after a swap.
- Singleton architecture
- A design where all pools live inside one contract (Uniswap v4), which can reduce the gas cost of creating pools and routing trades.
- MEV (maximal extractable value)
- Value that can be captured by reordering, inserting, or censoring transactions, possible because pending transactions are public. Shared for awareness only.
- ERC-20
- A common token standard on Ethereum that defines how fungible tokens behave, so they work consistently across apps.
- Self-custody
- Holding your own wallet keys, so only you control your tokens — with no company able to move or recover them for you.
- Smart contract
- A program stored on a blockchain that runs exactly as written. It can hold funds and execute rules without a central operator.
Disclaimer: These definitions are educational only. Nothing here is investment, financial, legal, or tax advice, or a recommendation to buy, sell, or trade any asset.