Glossary

This section contains glossary with common terminology used throughout this documentation

Automated Market Maker / "AMM"

An automated market maker is a smart contract on TON Blockchain that holds liquidity reserves. Users can trade against these reserves at prices determined by a fixed formula. Anyone may contribute liquidity to these smart contracts, earning pro-rata trading fees in return.

Asset

While a digital asset can take many forms, the STON.fi Protocol supports jetton pairs.

Liquidity Provider / "LP"

A liquidity provider is someone who deposits jettons into a given liquidity pool. Liquidity providers take on price risk and are compensated with trading fees.

Liquidity

Digital assets that are stored in a STON.fi pool contract, and are able to be traded against by traders.

Pair

A smart contract deployed from a STON.fi that enables trading between two jettons.

Pool

A contract deployed by the STON.fi protocol that pairs two assets.

Mid Price

The price between the available buy and sell prices. In STON.fi protocol, this is the ratio of the two jettons reserves.

Price Impact

The difference between the mid-price and the execution price of a trade.

Protocol Fees

Fees that are rewarded to the protocol itself, rather than to liquidity providers.

Swap Fees

Fees collected upon swapping which are rewarded to liquidity providers.

Slippage

An amount the price moves in a trading pair between when a transaction is submitted and when it is executed.

Basic token unit

A basic token unit is a minimum amount of a certain token, e.g. for $TON a basic token unit is nanoTon. In order to convert an amount of tokens to their representation in basic token units one must multiply an amount of tokens and 10 to the power of number of decimal places used for the token: 1 $TON = 1000000000 nanoTons, 1 $USDC = 1000000 basic USDC token units, etc.

Impermanent loss

Impermanent loss happens when you provide liquidity to a liquidity pool and the price of your deposited assets changes compared to when you deposited them. The bigger this change is, the more you are exposed to impermanent loss. In this case, the loss means less dollar value at the time of withdrawal than at the time of deposit. Pools that contain assets that remain in a relatively small price range will be less exposed to impermanent loss. Stablecoins or different wrapped (pegged) versions of a token, for example, will stay in a relatively contained price range. Impermanent Loss (IL) is a risk associated with providing liquidity to an Automated Market Maker (AMM). As a result, the AMM compensates liquidity providers with fees generated from trades from the pool.