## Glossary

### Liquidity Bits

Representation of a users contribution to an asset pool.

### Pool

A Smart Contract representing two types of tokens which users interact with to perform trading of tokens.

### KYC

Know your customer or know your client (KYC) are guidelines within financial services that require the verification of a users identity.

### DEX

DEX is short form for decentralized exchange.

### XCMP

Cross chain message passing (XCMP) is a method of communications with external blockchains currently under development by Polkadot.

### Parachain

A parachain is a simplistic blockchain that attaches to the security provided by a relay chain in order to perform its own independent computation.

### CFMM

Constant function market makers are based on a function whose (output) value is the same for every input value.

Example:

$$y(x)=4$$

### AMM

Automated market makers allow assets to be traded in a permissionless and automatic way via algorithms and liquidity pools.

### Smart Contract

A smart contract is a self-executing contract that operates on terms defined within its code.

### Synthetic Asset

A synthetic asset is a term that is used to describe a variety of assets represented as a single asset without the asset holder having to hold the underlying asset.

### Game Theory

Game theory refers to a framework to perceive theoretical outcomes between the strategies of independently competing parties.

### LMSR

A Logarithmic Market Scoring Rule is used to compute the current price of an asset in a prediction market as well as the cost to trade an asset between a trader and a market maker.

### Substrate

Substrate is a generic modular blockchain template architecture that allows the creation of custom blockchain networks.

### Hyper Collateralization

Hyper collateralization is a term used for when the ratio of collateral against the value of an asset is grossly out of proportion, surpassing the term of over collateralization.

### Penalty Pool

A pool representing liquidity tokens from users who called the withdraw function prior to their liquidity contract reaching maturity.