Pact
Search…
Introduction
FAQ
Knowledge Base
Security
Miscellaneous
Glossary
Below are some commonly used terms you'll encounter when using the Pact platform.
Pool
Also known as a liquidity pool (LP), is a mechanism in cryptocurrency markets where tokens are stored in a smart contract for the purpose of providing liquidity to a market.
Swap
Swapping refers to switching one coin or token for another.
Assets
Algorand Standard Assets (ASA) is the official naming convention for assets on the Algorand Blockchain. ASA's benefit from the same security, compatibility, speed and ease of use as the Algo token.
Liquidity
Liquidity is a measure of the ease at which an asset is able to be converted to another asset without affecting its price. The lower the liquidity, the higher the price impact will be. In simple terms, liquidity describes how quickly and easily an asset can be bought or sold.
Slippage
Slippage tolerance
When you sign the swap transaction, you agree to receive the exact amount of a chosen asset in exchange for an exact amount of the other one.
Because market prices are always moving, a certain amount of slippage tolerance is needed to avoid swaps failing by accident (when the execution price differs from the user defined price - even by a minor amount).
Pact's default slippage tolerance is set as 0.5%. Depending on your swapping preferences, you can change this figure to be any number between zero and one hundred.
Remember this is a 'worst case' parameter and generally the final price won't differ too much from the original one. If the final execution price exceeds the tolerance you have set, the transaction will be automatically rejected.
Impermanent loss
What Is Impermanent loss?
Impermanent loss is the difference between holding tokens in an AMM and holding them in your wallet.
It occurs when the price of tokens inside an AMM diverge in any direction. The more divergence, the greater the impermanent loss.
Why “impermanent”?
Because as long as the relative prices of tokens in the AMM return to their original state when you entered the AMM, the loss disappears, and you earn 100% of the trading fees.
However, if the prices of the tokens do not return to the original position, impermanent loss becomes permanent, potentially leaving you with negative returns.
Last modified 3mo ago