# Glossary
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](https://academy.binance.com/en/articles/impermanent-loss-explained). 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](https://support.uniswap.org/hc/en-us/articles/7423608592781-Can-I-provide-liquidity-over-the-full-range-on-V3-) 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 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](https://help.1inch.io/en/articles/4585109-what-is-price-impact-vs-price-slippage-in-defi), and lower [Price Impact](https://help.1inch.io/en/articles/4585109-what-is-price-impact-vs-price-slippage-in-defi). 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](https://docs.uniswap.org/concepts/protocol/range-orders) 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](https://www.coinbase.com/learn/crypto-basics/what-is-staking) income and [getting a loan](https://appinventiv.com/blog/how-defi-lending-works/).
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.
Rebalance The process used to chose new Liquidity Positions. During Rebalance, liquidity is removed from the old positions and redeposited into new positions.
ROI 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.
Tradability 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 price used by Passive Rebalancing to calculate the Base Order and Limit Order. It is equal to the spot price of the pool when rebalancing takes place.
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](/charm/manage-liquidity/user-guides/walkthroughs/verify-manager.md) 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.
--- # Agent Instructions: Querying This Documentation If you need additional information that is not directly available in this page, you can query the documentation dynamically by asking a question. Perform an HTTP GET request on the current page URL with the `ask` query parameter: ``` GET https://learn.charm.fi/charm/appendix/glossary.md?ask= ``` The question should be specific, self-contained, and written in natural language. The response will contain a direct answer to the question and relevant excerpts and sources from the documentation. Use this mechanism when the answer is not explicitly present in the current page, you need clarification or additional context, or you want to retrieve related documentation sections.