Glossary of Crypto Market Microstructure

A comprehensive glossary defining key terms across AMM mechanics, MEV, trading infrastructure, and on-chain forensics.

AMM & Liquidity

• Automated Market Maker (AMM) — An Automated Market Maker (AMM) is a smart contract that replaces the traditional order book with a ...
• Bonding Curve — A bonding curve is a mathematical function that defines the relationship between the supply of a tok...
• Concentrated Liquidity — Concentrated liquidity is a mechanism introduced by Uniswap V3 that allows liquidity providers to al...
• Constant Product Market Maker (CPMM) — A Constant Product Market Maker (CPMM) is the simplest and most widely used AMM formula, defined by ...
• DEX Aggregator — A DEX aggregator is a protocol that routes a user's trade across multiple DEXs to achieve the best p...
• Dynamic Fees — Dynamic fees are AMM fee rates that adjust algorithmically based on market conditions rather than re...
• Impermanent Loss — Impermanent loss (IL), also called divergence loss, is the difference between the value of assets he...
• Liquidity Provider (LP) — A Liquidity Provider (LP) is any entity that deposits tokens into an AMM pool and receives LP tokens...
• Loss-Versus-Rebalancing (LVR) — Loss-Versus-Rebalancing (LVR) is a metric that quantifies the underperformance of AMM liquidity prov...
• Range Order — A range order is a Uniswap V3 position placed entirely above or below the current price that functio...
• Slippage — Slippage is the difference between the expected execution price of a trade and the actual price at w...
• Tick — In Uniswap V3, a tick is a discrete price point at which liquidity can be allocated. Prices are expr...
• Time-Weighted Average Price (TWAP) — A Time-Weighted Average Price (TWAP) is an AMM oracle mechanism that records the cumulative price ov...
• Uniswap V4 Hooks — Uniswap V4 hooks are programmable callbacks that execute custom logic at specific points in a pool's...

MEV & Block Building

• Atomic Arbitrage — Atomic arbitrage is a risk-free trade that exploits a price discrepancy between two or more venues w...
• Based Sequencing — Based sequencing is a rollup design pattern where the Layer 1 (Ethereum) validators are the sequence...
• Block Builder — A block builder is a specialized entity in the PBS architecture that constructs execution payloads —...
• Cross-Chain MEV — Cross-chain MEV is value extracted from price differences, arbitrage opportunities, or transaction o...
• Intent-Based Architecture — An intent-based architecture is a DeFi design paradigm where users express desired outcomes ('swap X...
• MEV (Maximal Extractable Value) — Maximal Extractable Value (MEV) is the maximum value that can be extracted from block production bey...
• Order Flow — Order flow refers to the stream of trade instructions submitted by traders to trading venues. In the...
• Order Flow Auction (OFA) — An Order Flow Auction (OFA) is a mechanism where user orders are routed to a competitive auction amo...
• Payment for Order Flow (PFOF) — Payment for Order Flow (PFOF) is a compensation arrangement where a trading venue or intermediary pa...
• Preconfirmation — A preconfirmation (preconf) is a promise from a block proposer to include a specific transaction in ...
• Priority Gas Auction (PGA) — A Priority Gas Auction (PGA) occurs when multiple searchers compete for the same MEV opportunity by ...
• Proposer-Builder Separation (PBS) — Proposer-Builder Separation (PBS) is an Ethereum protocol design that splits the block production ro...
• Relay — In the MEV-Boost architecture, a relay is a trusted intermediary that receives blocks from builders,...
• Sandwich Attack — A sandwich attack is an MEV strategy where an attacker observes a pending transaction in the mempool...
• Searcher — A searcher is an entity that scans the blockchain for MEV opportunities — arbitrage paths, liquidati...
• Solver — A solver (also called a filler) is an entity in intent-based and OFA architectures that competes to ...

On-Chain Intelligence

• EIP-1559 — EIP-1559 was the Ethereum Improvement Proposal implemented in the London hard fork (August 2021) tha...
• Gas — Gas is the unit measuring the computational effort required to execute operations on the Ethereum Vi...
• Mempool — The mempool (memory pool) is the set of pending transactions that have been broadcast to the network...
• On-Chain Forensics — On-chain forensics is the practice of analyzing blockchain transaction data to reconstruct patterns ...
• Oracle Manipulation — Oracle manipulation is an attack where a malicious actor temporarily distorts the price feed used by...
• Regime Detection — Regime detection is the quantitative process of identifying statistically distinct market environmen...
• Tornado Cash — Tornado Cash is a privacy protocol on Ethereum that uses zero-knowledge proofs (zk-SNARKs) to break ...
• Zero-Knowledge Proof — A zero-knowledge proof (ZKP) is a cryptographic protocol that allows one party (the prover) to convi...

Trading Infrastructure

• Basis Trade — A basis trade (or cash-and-carry trade) is a delta-neutral strategy that captures the spread between...
• Central Limit Order Book (CLOB) — A Central Limit Order Book (CLOB) is the traditional exchange microstructure where buy and sell orde...
• CEX-DEX Arbitrage — CEX-DEX arbitrage is the strategy of exploiting price discrepancies between a centralized exchange a...
• Co-location — Co-location (colo) is the practice of placing trading servers in the same physical data center as an...
• Delta-Neutral — A delta-neutral position is a portfolio constructed so that the total delta (sensitivity to the unde...
• Flash Loan — A flash loan is an uncollateralized loan that must be borrowed and repaid within the same transactio...
• Funding Rate — The funding rate is a periodic payment between long and short positions in a perpetual futures contr...
• Latency — In trading systems, latency is the end-to-end delay between an external event (market data update, o...
• Perpetual Futures — A perpetual futures contract (perp) is a derivative that tracks the price of an underlying asset but...
• Request for Quote (RFQ) — Request for Quote (RFQ) is a trading mechanism where a trader requests a price quote from one or mor...
• Smart Order Routing (SOR) — Smart Order Routing (SOR) is an algorithm used by DEX aggregators to split a trade across multiple l...