glossary

terms

Active Bin

The bin at the current market price in a DLMM pool. The active bin holds both tokens and earns swap fees. When price moves to a different bin, the previous active bin becomes inactive. LPs must keep liquidity in or near the active bin to maximize fee earnings. See wAMM.

Active Liquidity

Liquidity deployed in DLMM bins that are currently earning swap fees, typically those at or near the active bin. When the market price moves outside a position's bin range, that liquidity becomes inactive and stops earning until price returns or the LP rebalances. See wAMM.

ADL (Auto-Deleveraging)

The final backstop in Lighter's liquidation waterfall. When the LLP insurance fund cannot fully cover losses in a strategy bucket, ADL matches opposite-side positions to close out risk. ADL is isolated per strategy: a depletion in crypto perps does not trigger ADL in FX or RWA buckets. See wLLP.

Adverse Selection

The systematic loss of LP value to informed traders (arbitrageurs) who trade against stale pool prices. When a CEX price moves before the AMM updates, the first trades hitting the pool are disproportionately toxic. Wick's dynamic fee algorithm spikes fees during volatile periods to price this risk before it arrives, reclaiming 86–95% of that loss during normal trading when volatility is priced correctly. See Wick arbitrage.

ALM (Automated Liquidity Management)

Protocol-owned market making that keeps tight liquidity near the current price. Tight ALM creates constant repricing flow; Wick routes that flow through dynamic fees and internal arbitrage instead of leaking it to outside bots. See Wick arbitrage: protocol-owned ALM.

AMM-Orderbook Arbitrage

The primary vector of Wick arbitrage. When the Lighter orderbook price diverges from a Wick pool price, Wick's permissioned bot buys from the cheaper venue and sells on the more expensive one in a single atomic transaction at 0% internal fee. See Wick arbitrage.

Asset

Digital tokens used in Wick. These include ERC-20 tokens for trading and ERC-721 NFTs that represent DLMM liquidity positions.

Auto-Compounding

A mechanism where earned yield (staking rewards, liquidation fees, swap fees) is automatically reinvested into the position without manual claiming or restaking. Both wLIT and wLLP use auto-compounding: rewards increase the token's exchange rate rather than distributing claimable tokens, eliminating gas costs and missed compounding windows.

Automated Market Maker

A smart contract on Lighter EVM that holds liquidity reserves. Users can trade against these reserves at prices determined by a fixed formula. Anyone can contribute liquidity to earn swap fees.

Bid-Ask (preset shape)

A DLMM liquidity shape that weights capital toward both ends of the price range (inverse curve). Captures larger volatility swings away from the active bin. Can deploy single-sided for DCA strategies. See wAMM.

Bin

A discrete fixed-price slot in a DLMM pool. Each bin trades at one price; swaps within a bin have zero price impact. Liquidity is distributed across bins according to the LP's chosen liquidity shape. See wAMM.

Bin Step

The percentage gap between consecutive bins in a DLMM pool, set at pool creation. Smaller steps suit stable pools; larger steps suit volatile pools. Bin step identifies the pool: (tokenX, tokenY, binStep). See wAMM.

Buyback

The mechanism by which Wick product revenue is used to purchase WICK tokens from the market. Revenue from the exchange, wLLP, wLIT, and arbitrage all feed into buybacks via sWICK. Buybacks replace dilutive emissions as Wick's value-accrual mechanism. See sWICK.

Capital Efficiency Multiplier

The ratio of effective liquidity depth in a DLMM position versus a full-range V2 position with the same capital. A position concentrated in a +/-10% price range achieves ~20x efficiency; a +/-1% price range achieves ~200x. See wAMM: competitive farming.

CEX (Centralized Exchange)

A traditional exchange with an orderbook and custodial or semi-custodial settlement. CEXes typically have much deeper liquidity than on-chain pools, so CEX-DEX arbitrage often extracts value from the shallower DEX side. See Wick arbitrage: liquidity asymmetry.

Claimable Bin

A limit-order bin whose filled tokens (full or partial) are locked and awaiting claim. Claim per bin or all at once. The LP pays the claim gas, not the swapper, so swaps stay efficient. See wAMM: limit orders.

Competitive Farming

A reward model where LP incentives scale with capital efficiency. The tighter and more actively managed a liquidity position, the higher the rewards relative to capital deployed. See wAMM: competitive farming.

Curve (preset shape)

A DLMM liquidity shape with a bell-curve distribution centered on the active bin. Maximizes capital efficiency near spot while tapering toward the edges of the price range. Best for stable and pegged pools. See wAMM.

DEX (Decentralized Exchange)

An on-chain trading venue, typically an AMM or orderbook settled on a blockchain. In CEX-DEX arbitrage, the DEX pool often bears most of the repricing cost because it is shallower than the CEX. See Wick arbitrage, liquidity asymmetry.

Directional Mismatch

The structural gap between an LP's price exposure and a simple hold portfolio — the endpoint cost behind impermanent loss. See concepts: path costs vs endpoint costs.

DLMM (Dynamic Liquidity Market Maker)

The bin-based liquidity model wAMM is built on. Liquidity is organized into discrete price bins with zero impact within each bin. See wAMM for how Wick uses DLMM on Lighter EVM.

Dynamic Fees

Wick's algorithm that adjusts swap fees in real time from market conditions, spiking in volatility and compressing when markets are calm. See dynamic fees.

ERC-4626

The tokenized vault standard used by wLIT. ERC-4626 defines a standardized interface for yield-bearing vaults (deposit, withdraw, redeem, convertToShares, convertToAssets, totalAssets), making wLIT natively compatible with any protocol that supports the standard: money markets, lending protocols, yield aggregators, and more.

ERC20

The standard interface for fungible tokens on EVM chains. Most assets traded on Wick, including WICK, wLIT, and wLLP, are ERC20 tokens.

Factory

The smart contracts responsible for deploying new Wick markets: DLMM pools (identified by token pair and bin step) and legacy full-range pairs. Pool parameters such as bin step are set at creation through the factory.

Fee-Arb Decomposition

Per-event split of LVR into the fee returned to LPs and the arbitrageur's profit. See concepts: fee-arb decomposition.

Fee Cap

The upper bound on dynamic fees during extreme volatility. Each pool category operates within configured bounds: the algorithm moves continuously between a base fee floor and the cap based on real-time signals. Bounds are tuned per pool, scaling with bin step and pool category. See fee ranges.

Fee-to-Volatility Ratio

The ratio of swap fee to typical per-block price move. Wick targets roughly 10:1: the swap fee is about ten times the expected per-block price jitter, so LPs recapture most of what would otherwise leak to arbitrageurs on each event. At ratios above 10:1, fee capture exceeds 95% of each event's LVR; below 1:1, the arbitrageur's share dominates. See concepts: fee-to-volatility ratio, dynamic fees.

Fee-Volatility Mismatch

The structural failure mode of static-fee AMMs. LPs are short volatility: they lose more when prices move sharply but earn the same fee regardless. Static fees overcharge traders in calm markets (losing volume to competitors) and undercharge during volatile periods (failing to compensate LPs for adverse selection). Wick's dynamic fees correct this by making compensation respond to volatility. See dynamic fees.

Fill

A per-bin setting on wAMM limit orders. When on, any filled amount — full or partial — locks and becomes claimable instead of converting back on a price reversal. Unfilled residual stays live. See wAMM: limit orders.

Gross Fee Growth

Total swap fee on a DLMM trade (baseFee + variableFee). protocolShare splits that revenue between LP compounding and protocol buybacks without changing the trader fee. See two fee layers.

Hooks

Optional contracts linked to a wAMM pool that execute custom logic on swaps or liquidity changes. Wick uses hooks for limit-order fill / claimable bins and wAMM options. Both are built on the same bin infrastructure as ordinary liquidity. See wAMM: hooks.

Impermanent Loss

The difference between holding tokens versus providing them as liquidity — an endpoint directional mismatch that fees and arbitrage cannot eliminate. See concepts: primer.

Insurance Fund

Lighter's protocol-level backstop capital for liquidations. See LLP (Lighter Liquidity Pool).

Invariant

The conserved quantity k in AMM swap curves. Wick uses two formulas: volatile pairs follow x * y = k, and stable pairs use the correlated curve xy(x² + y²) = k, which minimizes slippage between tokens of similar value. Learn more here.

LayerZero OFT

The Omnichain Fungible Token standard used by wLIT for cross-chain transfers. OFT burns wLIT on the source chain and mints an equivalent amount on the destination, maintaining a unified supply with no wrapped intermediaries. Since wLIT balances don't change (only the exchange rate does), there is no rebase synchronization needed across chains. See wLIT.

Lighter Core

Lighter's native perp and spot orderbook layer, distinct from Lighter EVM. Core handles order matching and perpetual markets; Lighter EVM handles smart contracts. The two compose atomically: a single ZK-verified transaction can bundle EVM DeFi steps with Core trading. wLIT and Wick arbitrage interact with Core for fee discounts and cross-venue execution. See wLIT.

Lighter EVM

Lighter's EVM-equivalent rollup, ZK-proven via OpenVM and settled on Ethereum. It composes with Lighter Core (perp and spot orderbook): smart contracts can bundle EVM DeFi steps with Core trading in one atomic, ZK-verified transaction. LIT is the gas token on Lighter EVM.

Lighter Orderbook

Lighter Core's native orderbook, which Wick arbitrage routes against. Price discrepancies between the AMM and the Lighter orderbook create arbitrage opportunities captured in-protocol at 0% internal fee. See Wick arbitrage.

Limit Order

On wAMM, a buy or sell at a chosen bin price with optional fill: filled amounts (including partials) lock as claimable bins instead of staying live as liquidity. Built with hooks. See wAMM: limit orders.

Liquid Staking

Staking a token while retaining a liquid, transferable claim on the staked position, instead of locking the asset until unstaking. Wick's liquid staking token is wLIT: deposit LIT, receive wLIT, and continue using the position as collateral, in trading, or across DeFi while staking rewards accrue through the auto-compounding exchange rate. See wLIT.

Liquidation Waterfall

The progressive risk management sequence in Lighter's perpetual markets. When a trader's account health deteriorates: (1) partial liquidation sends IoC orders at zero price, with LLP collecting up to 1% liquidation fee per fill; (2) full liquidation transfers the trader's positions to LLP directly; (3) ADL backstop matches opposite-side positions if LLP cannot cover. See wLLP.

Liquidity

Assets deposited in Wick pools and pairs, available for traders to swap against. Deeper liquidity lets larger trades execute with less price impact.

Liquidity Provider / "LP"

Users who deposit tokens into Wick pools or pairs so traders can swap against them. Liquidity providers assume price risk and are compensated with swap fees.

Liquidity Shape

How capital is distributed across bins in a DLMM position. Wick supports preset shapes (Spot, Curve, Bid-Ask) and Paint for custom drawn distributions. See wAMM.

LIT

The native token of the Lighter network and the gas token on Lighter EVM. LIT is used for transaction fees, native staking, and as the underlying asset for wLIT. Staking LIT through wLIT unlocks LLP deposit capacity (1 LIT staked unlocks up to 10 USDC). See wLIT.

LLP (Lighter Liquidity Pool)

Lighter's protocol-level insurance fund and liquidation backstop. Deposit capacity scales with LIT staked (up to 10 USDC per LIT). See wLLP.

LVR (Loss Versus Rebalancing)

Value arbitrageurs take from LPs by trading against stale pool prices. Path-dependent: it accumulates with every arbitrage event. See concepts: fee-arb decomposition, Wick arbitrage.

MEV (Maximal Extractable Value)

Value that can be extracted by reordering, inserting, or censoring transactions within a block. In AMM contexts, MEV often appears as arbitrage against stale pool prices. Wick internalizes much of this flow through in-protocol arbitrage and dynamic fees. See Wick arbitrage, dynamic fees.

No-Arbitrage Band

The price range around a pool's price within which external arbitrage is unprofitable. A pool with a 0.30% fee creates a +/-0.30% band; discrepancies below that threshold go uncaptured. Wick's internal bot operates at 0% fee, eliminating the band entirely: every price discrepancy, no matter how small, becomes capturable. Dynamic fees further widen the external band to protect LPs. See Wick arbitrage.

Paint

Wick's custom DLMM liquidity shape. LPs draw a free-form line across the bin chart; on release, liquidity heights snap to match the drawn curve. Enables strategies no preset shape can express. See wAMM.

Pair

A smart contract created by Wick's V2 factory that enables ERC20 trading. Learn more.

Period

A span of time used as a reference window in protocol mechanics: cooldown windows, redemption delays, TWAP durations, or fee-to-volatility calculations over a trading window.

Pool

A wAMM smart contract that enables trading between two ERC20 tokens. Each token pair can have multiple pools with different bin steps. Fees are dynamic; bin step identifies the pool. Learn more here.

Position

A liquidity allocation in a DLMM pool defined by a price range, liquidity shape, and liquidity amount. Each position is represented as an NFT and can be managed independently. Positions are only active (earning fees) when the current price is within their price range. Learn more here.

Predictive Fee Model

Wick's policy layer that adjusts fee parameters from external CEX/DEX feeds before arbitrage arrives, alongside the reactive variable fee. See dynamic fees: predictive, not just reactive.

Price Impact

The effect a trade has on an asset's price due to the size of the order relative to pool liquidity. Larger trades typically result in higher price impact.

Price Range

The interval from a minimum bin ID to a maximum bin ID that defines a DLMM position's coverage on the price axis. Price must stay within this price range for the position to remain active and earn fees.

Protocol Share

Share of collected swap fees routed to protocol revenue (feeding sWICK buybacks) versus the LP compounding path. Splits revenue after traders pay baseFee + variableFee; it does not change the trader-facing fee rate.

Slippage

The difference between the expected price of a trade and the price it actually executes at, caused by price movement or price impact between submission and execution.

Spot (preset shape)

A DLMM liquidity shape with uniform distribution across all bins in the price range. Versatile default with lower rebalancing frequency. See wAMM.

Spot Price

The current exchange rate between two assets in a pool, calculated from the pool's reserves before any trade occurs.

Strategy Isolation

LLP's risk architecture where collateral is allocated across distinct strategy buckets (crypto perpetuals, FX, RWAs). Losses in one bucket are capped to that bucket's allocation and do not spill into others. If a strategy's collateral is fully depleted, only that strategy enters ADL. See wLLP.

Strike

The reference price that anchors a wAMM option's bin layout. Liquidity peaks at the strike and tapers into downside and upside wings. Hooks program how the position converts as spot crosses each bin. Under active development. See wAMM: options.

Swap Curve (Volatile or Correlated)

The AMM formula that determines trade prices in pairs. Wick uses two curves: volatile (x * y = k) for standard token pairs, and stable (xy(x² + y²) = k) for correlated assets like stablecoins. The correlated curve provides significantly less slippage between tokens of similar value. Learn more here.

Swap Fees

Trading fees earned by liquidity providers. In both DLMM pools and legacy pairs, fees adjust dynamically via the dynamic fee algorithm and compound automatically into the position.

sWICK

Staked WICK (1:1). While staked, it is Wick's buyback-and-accumulate sink: protocol revenue buys WICK from the open market on a continuous basis, and that WICK accrues to holders. Holders also get reduced premium-account trading fees on Lighter Core via wallet linking and increased wLLP deposit allowance. Exiting back to WICK uses a delayed full redemption or a discounted instant exit. See sWICK.

Toxic Flow

Trading activity that systematically drains value from LPs. Toxic flow comes from informed traders (typically arbitrageurs) who exploit the delay between external price movements and AMM pool price updates. Wick combats toxic flow with dynamic fees that spike before the flow arrives and Wick arbitrage that captures the spread in-protocol.

Variable Fee

The onchain surcharge added when swaps cross bins, part of totalFee = baseFee + variableFee. See two fee layers.

wAMM (Wick Automated Market Maker)

Wick's on-chain exchange on Lighter EVM, spanning all Wick liquidity: DLMM bin-based pools and legacy full-range pairs. In DLMM pools, liquidity is organized into discrete price bins; swaps within a bin execute at fixed price with zero impact, and LPs choose price ranges and liquidity shapes. Learn more here.

wAMM option

An options-like payoff built directly on wAMM pools, anchored at a strike price. Liquidity is deployed in bins above and below the strike; hooks enforce the programmed payoff as spot trades through those bins. Under active development alongside limit orders. See wAMM: options, wAMM options.

WICK

Wick's protocol token and the destination of all product revenue. Revenue from the exchange, wLLP, wLIT, and Wick arbitrage is used to buy back WICK from the market, and the purchased WICK accumulates for sWICK holders. See sWICK.

Wick arbitrage

Wick's in-protocol arbitrage product. When prices diverge across Wick pools, the Lighter orderbook, and external venues, Wick's permissioned execution path buys from the cheaper venue and sells on the more expensive one at 0% internal pool fee, atomically within the same block. Captured spreads are used to buy back WICK, which accrues to sWICK holders. Its primary vector is AMM-orderbook arbitrage. Learn more here.

wLIT

Wick's liquid staking token for LIT: an ERC-4626 vault where the wLIT:LIT exchange rate rises as rewards accrue. Liquid, transferable, and bridgeable via LayerZero OFT; each staked LIT unlocks up to 10 USDC of LLP deposit capacity. See wLIT.

wLLP

Wick's liquid wrapper for LLP yield. Deposit USDC for auto-compounding shares; capacity is set by wLIT staking, and sWICK raises individual deposit allowance. See wLLP.