DeFi Trading Terms: Aggregators, Slippage, Gas, Price Impact, and AMMs
Summary
This glossary explains common concepts involved in trading through a decentralized finance aggregator. It describes how an aggregator can combine liquidity from multiple pools, defines slippage as the difference between an expected and executed price, and explains that a transaction may be canceled when slippage exceeds a chosen limit. It also outlines blockchain gas fees and price impact, the estimated effect of a trade on an asset’s price.
The entry defines a liquidity pool as assets deposited in a smart contract and describes an automated market maker as a pool based system that uses a mathematical formula to set prices, instead of matching orders in a conventional order book. It notes that more pooled tokens can improve liquidity, while exchange trading activity may be more intense than liquidity provision. These are introductory descriptions rather than a comparison of specific protocols or a tested trading method. The document provides no performance evidence, fee data, or detailed treatment of pool risks, routing, or how AMM formulas behave under different market conditions.
Key ideas
- A DeFi aggregator brings together liquidity from multiple trading pools.
- Slippage measures the difference between the expected execution price and the actual price.
- Gas fees compensate blockchain participants who validate transactions.
- Price impact estimates how a trade may change an asset’s price in a pool.
- AMMs price trades through liquidity pools and a mathematical formula rather than a traditional order book.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.