Learn about AMMs

• What is an AMM? An Automated Market Maker (AMM) is a decentralized exchange mechanism where users trade against liquidity pools instead of traditional order books. AMMs maintain a balance between the tokens in a pool using mathematical formulas (x * y = k) to enable swaps

• What is Idle Capital? Idle capital refers to unused liquidity sitting in pools that isn't actively utilized in trades. For example, in a SOL-USDC pool during an uptrend, most trades may involve swapping USDC for SOL, leaving a large portion of USDC untouched.

• Liquidity Provider (LP) Users who deposit tokens into AMM pools to enable trading and earn fees.

• Dynamic Fees A mechanism where fees is adjusted based on pool activity and volatility, benefiting LPs during market volatility.

• Capital Efficiency Maximizing the utility and yield of deposited funds in a pool.

• Total Value Locked (TVL) The total amount of funds locked in an AMM’s liquidity pools, representing the scale of liquidity available for trading.

• Slippage The difference between the expected price of a trade and the actual price due to insufficient liquidity or high trade size.

• Impermanent Loss (IL) A temporary loss in value experienced by LPs when the price of tokens in a pool changes significantly compared to when they were deposited.

• Liquidity Pool (LP) A pool of two tokens that enables trading on an AMM by maintaining a balance according to a constant product formula.

• External Protocols Platforms outside of GooseFX, such as lending or borrowing protocols, where Fusion deploys idle capital to earn additional yield.

• Dynamic Rebalancing The process of adjusting deployed liquidity based on pool needs and market conditions to maintain optimal performance.

• Permissionless Pools Liquidity pools that can be created by anyone without approval, allowing a wide range of token pairs to trade on the AMM.