Solana DeFi terminology glossary
Definitions written for readers studying protocols and liquidity concepts. Search below or scroll the full list.
- AMM (Automated Market Maker)
- A smart contract that sets token prices using a mathematical formula rather than an order book. On Solana, popular AMMs include Raydium, Orca, and Meteora.
- CLMM (Concentrated Liquidity Market Maker)
- An AMM variant where liquidity providers choose a price range. Capital concentrates where trading occurs, but positions outside the range earn no fees.
- Impermanent Loss
- The difference in value between holding tokens in a liquidity pool versus holding them in a wallet, caused by price divergence. Becomes permanent when you withdraw at unfavorable ratios.
- Liquidity Pool
- A shared token reserve locked in a program that enables swaps. Providers deposit token pairs and receive LP tokens representing their share.
- LP Token
- A receipt token proving your share of a pool. Burning LP tokens returns your proportional share of the underlying assets at current ratios.
- TVL (Total Value Locked)
- The aggregate dollar value of assets deposited in a protocol. Useful for scale comparisons but does not measure pool depth for a specific trading pair.
- Slippage
- The difference between expected and executed swap price, caused by trade size relative to pool liquidity. Large trades in shallow pools incur higher slippage.
- Oracle / Price Feed
- An external data source that reports asset prices on-chain. Solana DeFi commonly uses Pyth and Switchboard. Stale or manipulated feeds create protocol risk.
- Yield Farming
- Depositing LP tokens or staking assets to earn additional token rewards. Reward rates change with participation and emission schedules.
- Program ID
- The on-chain address of a Solana smart contract. Verifying the correct program ID prevents interacting with spoofed or deprecated deployments.
- Tick Spacing
- The minimum price increment in a CLMM. Tighter spacing allows finer range selection but increases account rent and transaction complexity.
- Swap Aggregator
- A service that splits trades across multiple pools and DEXes to reduce slippage. Jupiter is the most used aggregator on Solana.
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