# Glossary

## Glossary

#### Automated market maker <a href="#automated-market-maker" id="automated-market-maker"></a>

An automated market maker is a smart contract on Ethereum that hold on-chain liquidity reserves. Users can trade agains these reserves at prices set by an automated market making formula.

#### Constant product formula <a href="#constant-product-formula" id="constant-product-formula"></a>

The automated market making algorithm used by Uniswap. See [x\*y=k](#x--y--k).

#### ERC20 <a href="#erc20" id="erc20"></a>

ERC20 tokens are fungibile tokens on Ethereum. Uniswap supports all standard ERC20 implementations.

#### Factory <a href="#factory" id="factory"></a>

A smart contract that deploys a unique smart contract for any ERC20/ERC20 trading pair.

#### Pair <a href="#pair" id="pair"></a>

A smart contract deployed from the Uniswap V2 Factory that enables trading between two ERC20 tokens.

#### Pool <a href="#pool" id="pool"></a>

Liquidity within a pair is pooled across all liquidity providers.

#### Liquidity provider / LP <a href="#liquidity-provider--lp" id="liquidity-provider--lp"></a>

A liquidity provider is someone who deposits an equivalent value of two ERC20 tokens into the liquidity pool within a pair. Liquidity providers take on price risk and are compensated with fees.

#### Mid price <a href="#mid-price" id="mid-price"></a>

The price between what users can buy and sell tokens at a given moment. In Uniswap this is the ratio of the two ERC20 token reserves.

#### Price impact <a href="#price-impact" id="price-impact"></a>

The difference between the mid-price and the execution price of a trade.

#### Slippage <a href="#slippage" id="slippage"></a>

The amount the price moves in a trading pair between when a transaction is submitted and when it is executed.

#### Core <a href="#core" id="core"></a>

Smart contracts that are essential for Uniswap to exist. Upgrading to a new version of core would require a liquidity migration.

#### Periphery <a href="#periphery" id="periphery"></a>

External smart contracts that are useful, but not required for Uniswap to exist. New periphery contracts can always be deployed without migrating liquidity.

#### Flash swap <a href="#flash-swap" id="flash-swap"></a>

A trade that uses the tokens being purchased before paying for them.

#### `x * y = k` <a href="#x--y--k" id="x--y--k"></a>

The constant product formula.

#### Invariant <a href="#invariant" id="invariant"></a>

The “k” value in the constant product formula
