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 within a position's price range that is currently earning fees. When the market price moves outside the position's range, that liquidity becomes inactive and stops earning fees. Only in-range liquidity shares swap fees; out-of-range positions earn nothing until price re-enters the range. 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.

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 concepts: protocol-owned ALM, Wick arbitrage.

Adverse Selection

The systematic extraction of value from LP positions by 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 extraction during normal trading. See Wick arbitrage.

AMM-Orderbook Arbitrage

Wick's primary arbitrage vector. When the Lighter orderbook price diverges from the AMM 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. The captured spread flows into sWICK buybacks. 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 and LP incentives.

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 all 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. There are no dilutive emissions and no lock-ups. See sWICK.

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 concepts: liquidity asymmetry.

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

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.

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 pairs. See wAMM.

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.

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, concepts: liquidity asymmetry.

Directional Mismatch

The structural mechanism behind impermanent loss. At any price, the LP position and a hold portfolio have different exposure to the underlying asset. As price rises, the LP has systematically sold the appreciating asset (underexposed); as price falls, the LP has bought the depreciating asset (overexposed). This exposure gap accumulates across the whole price path. The mismatch is structural and cannot be eliminated by any fee, auction, or execution mechanism; it is the irreducible endpoint cost of providing two-sided liquidity. See impermanent loss, concepts: path costs vs endpoint costs.

Dynamic Fees

Wick's fee algorithm that adjusts swap fees in real-time based on market conditions. Fees spike during volatile periods (up to 5% cap) to protect LPs from adverse selection, and compress during calm markets (as low as 0.01%) to stay competitive. The algorithm monitors external CEX/DEX price feeds to price risk before arbitrage arrives, running adjustments as frequently as every 30 seconds. 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

Fungible token standard.

Factory

The smart contracts responsible for deploying new trading pairs and pools.

Fee-Arb Decomposition

The per-event breakdown of value extracted from a pool. Each arbitrage event's gross extraction (LVR) splits into two pieces: the fee collected by the pool (returned to LPs) and the arbitrageur's profit (lost to the ecosystem). The fee piece grows linearly with trade size, while the arbitrageur's profit grows quadratically. This means at small price deviations, fees capture nearly all of the extraction. Wick's dynamic fee algorithm is designed to keep this split as favorable as possible for LPs. See LVR, concepts: fee-arb decomposition.

Fee Cap

The upper bound on dynamic fees during extreme volatility. Wick's fee algorithm operates within configurable ranges: base fees start as low as 0.05% for stable pools, with caps reaching up to 5% during flash crash or extreme arbitrage conditions. The algorithm moves continuously between the base fee and the cap based on real-time signals. See 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.

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 per-event extraction; below 1:1, the arbitrageur's share dominates. See concepts: fee-to-volatility ratio, dynamic fees.

Gross Fee Growth

Total swap fee revenue collected on each DLMM trade: baseFee + variableFee, where the static floor (baseFactor × binStep) combines with a volatility surcharge driven by bin crossings. Collected fees route through protocolShare: one portion compounds into LP positions, the rest goes to protocol/voters. In fee-arb decomposition terms, gross extraction per event splits into the fee portion returned to LPs and the arbitrageur's profit (plus protocol share). See Wick arbitrage.

Hooks

Optional contracts linked to a wAMM pool that execute custom logic on swaps or liquidity changes. Wick uses hooks for auto-withdrawing range orders and wAMM options. Both are built on the same bin infrastructure as ordinary liquidity. See wAMM: hooks.

Impermanent Loss

The difference between holding tokens in a wallet versus providing them as liquidity. IL is fundamentally a directional mismatch: the LP position and a hold portfolio have different price exposures at every price except the entry point. As price moves, the LP is systematically underexposed to the appreciating asset and overexposed to the depreciating one. This gap is structural: no fee structure, execution rule, or block time can eliminate it. Concentrated liquidity amplifies IL: a V2 pool sees ~5.7% IL on a 2x price move, while a narrow DLMM position can approach 100% loss if price fully exits the price range. Dynamic fees and Wick arbitrage address the per-event arbitrage extraction cost, but endpoint IL persists regardless. See concepts: primer and wAMM.

Insurance Fund

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 Orderbook

The native orderbook of the Lighter blockchain, 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.

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.

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 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.

Limit Order

An order to buy or sell tokens at a specific price or better. The order only executes when the market reaches the target price, giving users control over execution timing and price. Learn more here.

Liquidity

Assets in Wick pools/pairs available for trading.

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.

Liquidity Provider / "LP"

Users who pair and pool ERC20 tokens. Liquidity providers assume price risk and are compensated with swap fees and LP incentives.

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.

LLP (Lighter Liquidity Pool)

Lighter's protocol-level insurance fund and liquidity backstop. LLP acts as the counterparty of last resort: absorbing liquidated positions, collecting liquidation fees, and backstopping ADL events. Collateral is allocated across isolated strategy buckets (crypto perps, FX, RWAs), so losses in one category do not spill into others. Access is gated by LIT staking: 1 LIT staked unlocks up to 10 USDC of LLP deposit capacity. See wLLP.

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.

LVR (Loss Versus Rebalancing)

The value extracted from LPs by arbitrageurs who trade against stale pool prices. Unlike impermanent loss (which depends only on the endpoint price), LVR is path-dependent: it accumulates with every arbitrage event along the way. Each event decomposes into a fee (returned to LPs) and arbitrageur profit (lost to the ecosystem); see fee-arb decomposition. In CEX-DEX arbitrage, the DEX pool bears over 99% of the total cost because centralized exchanges operate with effectively infinite depth. Wick captures this spread internally before outside arbitrageurs exploit it. At sufficiently high fee-to-volatility ratios, fees recapture over 95% of LVR for LPs. See Wick arbitrage, concepts: fee-arb decomposition.

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

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.

Period

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

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.

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.

Predictive Fee Model

Wick's approach to dynamic fee adjustment. Unlike reactive systems that adjust fees based on internal pool metrics (lagging behind volatility), Wick monitors external CEX and DEX price feeds to detect incoming volatility and adjust fees before arbitrage arrives. Fees are already elevated by the time toxic flow hits. See dynamic fees.

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.

Range Order

A limit order approximation using single-asset liquidity in a narrow price range. When price fully crosses the price range, the position converts to the target token. Unlike traditional limit orders, range orders earn swap fees while being filled. See wAMM.

Slippage

Price change between trade 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.

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.

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.

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 DLMM pools, fees adjust dynamically via the dynamic fee algorithm and compound automatically into the position. In legacy pairs, fees are configurable and also auto-compound: volatile (0.2-2%), correlated (0.001-0.03%), native (1-3%).

Toxic Flow

Trading activity that systematically extracts 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.

TWAP

Time-weighted Average Price order that breaks large trades into smaller chunks executed over time to minimize price impact. Uses a maker-taker model: makers submit orders with price and expiration parameters, takers compete to execute at the best price. Configuration includes intervals (number of trade chunks), interval time, and max duration. Learn more here.

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 flow into sWICK buybacks. Learn more here.

wAMM (Wick Automated Market Maker)

Wick's on-chain exchange on Lighter EVM. Built on the DLMM bin-based liquidity model. Liquidity is organized into discrete price bins; swaps within a bin execute at fixed price with zero impact. 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 auto-withdrawing range orders. See wAMM: options.

wLIT

Wick's liquid staking token for LIT, built as an ERC-4626 tokenized vault on Lighter EVM. Deposit LIT and receive wLIT shares; as staking rewards accrue, the wLIT:LIT exchange rate increases (starting at 1:1 at launch). No lock-up period: wLIT is fully liquid, transferable, and bridgeable cross-chain via LayerZero OFT. Each LIT staked through wLIT unlocks up to 10 USDC of LLP deposit capacity and supports fee discounts on Lighter for sWICK holders and Wick arbitrage. See wLIT.

wLLP

Wrapped Lighter Liquidity Pool token with auto-compounding yield. Deposit LLP tokens into wLLP and receive shares that appreciate as liquidation fees and position takeover profits accrue. wLLP access is gated by LIT staking via wLIT. Holding sWICK increases how much wLLP a user can deposit, based on sWICK holdings and available capacity. Wick revenue from wLLP includes wAMM swap fees, a 10% protocol fee on compounds, and fees from external composability. Revenue feeds sWICK buybacks. See wLLP.

sWICK

The buyback-and-accumulate mechanism for the WICK token. Revenue from exchange swap fees, wLLP wrapper fees, wLIT staking protocol fees, and Wick arbitrage profits is aggregated, converted, and used to purchase WICK from the open market on a continuous basis. sWICK holders receive lower Premium fees on Lighter Core via wallet linking and increased wLLP deposit allowance based on holdings. See sWICK.