Terms & Concepts
Trading Type
Projects
Endpoints
Fee Transaction Priority
Additional fees were introduced to transactions as a method to allow users to bid for priority for their transactions in the leader's queue. To read more about this: https://docs.solana.com/proposals/fee_transaction_priority
The Central Limit Order Book (CLOB)
Central limit order book (CLOB) is a trade execution model that matches orders from buyers and sellers based on a set of rules. The difference between the highest bid and the lowest ask is called the spread. Markets with high liquidity have much smaller spreads, since the depth of demand and supply at each price level is high.
Spot Market / Spot Trading
Spot trading is a simple concept in which traders buy crypto assets and wait for them to rise in value. For example, when trader Sue buys a position in Bitcoin, she hopes that she will be able to sell it for profit at a later stage.
In spot trading, you buy the asset with your own money. This means you can only buy as much as you can afford, and nothing more. For this reason, it is considered relatively safer than other trading markets. In the worst-case scenario, you lose all the money you invested. Other trading methods, such as margin trading, can cost you even more. In this market, even when the token becomes worthless, you will never be forced to sell.
Derivatives
A derivative is a financial contract between two or more parties based on the future price of an underlying asset.
Financial derivatives are discussed a lot when it comes to the crypto industry, especially concerning futures contracts for Bitcoin or altcoins. It is worth noting that the derivative is one of the oldest forms of a financial contract that exists on the market. The history of this type of deal can be traced to antiquity: In medieval times, derivatives were used to facilitate trades among merchants who traded all over Europe and participated in periodical fairs, an early form of markets in the Middle Ages.
Derivatives have evolved for centuries to become one of the most popular financial tools. Nowadays, a derivative is understood as a security that derives its value from an underlying asset or benchmark. The contract can be signed between two or more parties that want to buy or sell a particular asset for a specific price in the future. The value of the contract will therefore be determined by changes or fluctuations in the price of the benchmark it derives its value from.
Crypto futures, dated futures
Futures involve an agreement between a buyer and a seller to sell an asset in the future. The specific date and amount are also agreed on ahead of time. Contract details may vary, but the terms are usually similar.
Futures are a popular type of crypto derivative commonly used by institutional investors. Data from futures are typically used to predict future price movements and market sentiment.
Traders may either gain or lose depending on future price changes.
Perpetual Contracts
A perpetual contract, also called a perpetual futures contract or perpetual swap, is the most prolific type of crypto derivative, especially among day traders. In traditional finance, the equivalent of a perpetual contract would be contracted for difference (CFD).
The main difference between perpetual contracts vs. futures and options is that perpetual contracts do not have an expiry date. Positions can be kept for as long as the trader wants, provided they pay holding fees, called the funding rate. The account must also contain a minimum amount, called the margin.
Underlying assets typically change in price, which means that the difference between the index price and the price of perpetual futures contracts is typically huge. If, for example, the price of the perpetual contract is higher than the index, those who chose to “go long” would normally pay the funding rate to cover the price difference.
Automated Market Maker (AMM)
Unlike an order book that specifies prices at which buyers and sellers wish to trade, an AMM exchange aggregates liquidity for both sides of a trading pair into a pool. The AMM pool then determines a single market price according to a deterministic algorithm. The price formula is usually based on the pool’s current liquidity, or in other words the availability of an asset in the pool.
Openbook
Openbook is a fork of Serum v3, on a newly deployed program ID, deployed by a multi-sig. The reason why fork Serum code is that FTX had access to Serum and funds could be stolen by the "hacker", a forked program with multisig control on Realms.
Raydium
Raydium is an automated market maker (AMM) built on the Solana blockchain which leverages a central limit order book to enable lightning-fast trades, shared liquidity and new features for earning yield.
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