Glossary
Definitions for common terms.
Last updated
Definitions for common terms.
Last updated
Automated Market Makers are a form of decentralized exchange (DEX) that allow users to trade against tokens held by a smart contract known as a liquidity pool. Liquidity Providers (LPs) can deposit funds in the pool—typically equal USD values of two tokens—for traders to swap against. An algorithm determines the price based on supply and demand. As the number of each token in the pool changes, so does the quoted price.
The Annual Percentage Rate is the yearly return paid out on a financial asset, such as earnings through yield farming and staking RUBY. Unlike APY (Annual Percentage Yield), APR does not take into account the effect of compounding. APRs on Ruby's yield farms and staking/locking change over time, due to evolving market conditions and the number of people claiming rewards.
A Decentralized Autonomous Organization is a blockchain-based protocol or decentralized application (dApp) that is managed by a community. Token holders vote to allocate funds or update the dApp's code, with decisions being enforced on-chain. DAOs aim to remove single points of failure from both the infrastructure of a project (by using the blockchain) and its governance, by avoiding reliance on a core team or individual developer.
A Decentralized Exchange is a dApp that provides a means of trustlessly trading cryptocurrencies and tokens on the blockchain, without relying on any centralized intermediaries (as conventional crypto exchanges do). Some DEXs recreate the traditional exchange UX on the blockchain, with limit orders and order books, but AMMs have proven a popular and user-friendly alternative for the DeFi world.
The SKALE Interchain Messaging Agent enables users to bridge assets between Ethereum mainnet and SKALE, or between two SKALE Chains. Assets are locked by a smart contract on one chain and then, after a sufficient number of confirmations, a message is sent via the IMA and a synthetic asset on the target chain is minted. Transferring tokens in reverse, the minted asset is burned and the original asset on the destination chain is unlocked. Compared to other bridges in the DeFi space, the IMA Bridge is fast, while maintaining decentralization.
Impermanent loss is the change in the value of the liquidity provider's share of an AMM pool caused by price movements, compared to the value if the original tokens had simply been held in an external wallet.
For example, if the price of ETH is $1,000, and a liquidity provider deposits 1 ETH and 1,000 USDC ($2,000 total value), and then the price of ETH rises to $2,000, in a standard XY=K pool the user's LP token will be redeemable for 0.71 ETH and 1,414 USDC ($2,828). While this represents a profit, the LP would have $3,000 if they had held the original assets—not taking into account the effect of fees earned, or yield farming rewards (which typically offset impermanent loss over the long term). If ETH returns to the initial price of $1,000, the LP can withdraw their assets for their original value, plus any fees earned.
Liquidity Providers deposit tokens in the liquidity pool of an AMM, for users to trade against. They are compensated for the commitment of capital and risk of impermanent loss by fees, and often yield farming rewards.
Non-fungible tokens are unique or limited-edition, indivisible blockchain tokens. Unlike typical fungible tokens (e.g. ERC20s), each token can only be owned by one account. NFTs can be used to represent digital artworks, in-game items, metaverse properties, or custom financial assets, such as Ruby's gemstones, which confer permissioned rewards on the holder.
The Ruby AMM Protocol consists of two AMMs: a set of XY=K pools for crypto tokens such as BTC, ETH, SKL, and RUBY, and a StableSwap 4Pool for trading stablecoins (USDP, USDC, USDT, DAI). Ruby also supports yield farming on selected pools, and single-sided staking of RUBY tokens.
SKALE V2 is a multichain scaling solution, built on top of Ethereum and EVM-compatible, that is capable of running an unlimited number of secure, decentralized, and high-performance blockchains. Chains are modular and customizable, and offer high throughput and pooled security via randomized node selection and rotation. Chains are funded via subscriptions, so end users pay zero gas fees.
The entire ecosystem of interlinked SKALE Chains, hosting dApps across the spectrum of Web3 services.
The additional yield paid to LPs, in addition to trading fees, to incentivize liquidity provision. Yield farming earnings typically take the form of project tokens (e.g. RUBY), but can be paid in any token, or multiple tokens.
