Charm Finance


The dictionary describing all the definitions used in the docs.
Alpha Vault
An LP Vault created using Alpha Vaults.
Alpha Vaults
The smart contract system that creates decentralized LP vaults for any Uniswap V3 pool.
Base Order
The Liquidity Position chosen by an Alpha Vault to collect fees.
Community Vaults
An Alpha Vault that was not created by Charm.
Capital Efficiency
The improvements in Liquidity versus a Full Range Strategy, as measured by the increase in trading volume.
Capital Loss
The amount capital Liquidity Providers will lose by providing and withdrawing liquidity. It is equal to realised and unrealised impermanent loss.
Impermanent loss cannot be eliminated, because it is an essential feature of Decentralised Exchanges (DEX) that generates Fee Income for LPs.
For simplicity, Capital Loss will be used inter-changeably with impermanent loss throughout the docs.
Fee Income
The income liquidity providers earn after providing assets to a DEX pool.
Traders pay a fee to LPs when they use their assets to trade, and liquidity providers incur Capital Loss whenever their assets are traded.
Full Range Position
A Liquidity Position with the maximum possible price range.
Compared to other Liquidity Positions, A Full-Range Position earn the lowest Fees Income, but also have the lowest risk of Capital Loss.
It also guarantees tokens can always be traded.
Full Range Strategy
An LP Strategy where assets are only deposited into a Full Range Position.
In Range Liquidity
The amount deposited into a Liquidity Position when the market price is within the range specified by the Liquidity Position.
The deposits will earn Fee Income, and will be used by traders to trade.
Limit Order
The Liquidity Position chosen by an Alpha Vault to reduce capital loss.
Liquidity is the size of the trade that can be placed to move the Market Price.
Higher Liquidity result in higher trading volumes, lower Price Slippage, and lower Price Impact.
The Liquidity is always zero for Out-of-Range Liquidity.
Liquidity Concentration
The process of depositing assets into any Liquidity Position that is not a Full Range Position.
Liquidity Manager
An individual or smart contract using an LP Strategy to manage the Liquidity Position.
The LP Strategy is open-sourced by passive Liquidity Managers, and close-sourced by active Liquidity Managers.
Liquidity Pool
A smart contract where LPs deposit their assets.
Liquidity Position
The price ranges of the Range Order chosen by a Liquidity Provider or Liquidity Manager when providing liquidity.
Liquidity Provider (LP)
A wallet or smart contract depositing assets to a pool of assets in a Decentralized Exchange (DEX).
LPs earn income from the trading fees generated by the DEX, but risk Capital Loss when traders use their assets to trade.
LP Industry
The industry providing services for Liquidity Providers and Liquidity Managers.
LP Returns
The amount of Fees Income earned by LPs in excess of the Capital Loss.
LP Returns is often measured as the Return On Investment (ROI) versus holding the asset (ie not providing liquidity), but can also be measured as the ROI versus a Full-Range Position.
LP Shares
The ERC-20 token Liquidity Providers receive after depositing into an LP Vault.
LP Shares are used to withdraw an LP's assets from the LP Vault, and to access other benefits such as staking income and getting a loan.
LP Strategy
The methodology that determines how Liquidity Positions are chosen.
This methodology is open sourced by passive Liquidity Managers, and close sourced by active Liquidity Managers.
LP Vault
An asset management system that chooses Liquidity Positions on behalf of Liquidity Providers.
Decentralised LP Vaults are smart contracts deployed and operated entirely on a public blockchain.
Market Price
The amount of tokens that can be swapped for 1 unit of the other token within a Liquidity Pool.
Out of Range Liquidity
The amount deposited into a Liquidity Position when the market price is outside the range specified by the Liquidity Position.
The deposits will not earn Fee Income, nor will they be used by traders to trade.
Passive Rebalancing
An LP Strategy that relies entirely on changes in the market price to manage liquidity.
Passive Vault
An investment vehicle that earns income using an open-source, transparent, and rules-based LP Strategy.
The vaults created by Alpha Vaults are the first Passive Vaults.
The process used to chose new Liquidity Positions.
During Rebalance, liquidity is removed from the old positions and redeposited into new positions.
A depositor's return in investment after depositing into an LP Vault.
The ROI is equal to Fee Income minus Capital Loss.
For example, if a depositor deposited 1 WETH and 2000 USDC into an LP Vault, and the ROI after 4 months is 10%, they would have earned 0.1 WETH and 200 USDC during 4 months.
The amount of trading volume that can be generated within the pool of liquidity managed by the Liquidity Manager.
Tradability is always zero for Out of Range Liquidity.
Update Price
The Market Price used by Passive Rebalancing to calculate the Base Order and Limit Order.
Vault Manager
The wallet address that can change the parameters of an Alpha Vault.
Verified Manager
A vault manager who have passed Charm's on-chain verification system.
Worst Case Liquidity
The Liquidity generated by an Alpha Vault when the Market Price is outside the ranges chosen by the Base Order and the Limit Order.