Glossary
Frequently Used Terms in Lynx
Last updated
Frequently Used Terms in Lynx
Last updated
This page offers references to many of the keywords used in Lynx along with their corresponding definitions. This page is geared primarily toward traders and liquidity providers.
The collateral asset is the specific token that traders use to secure their trades. Traders must hold this asset in their wallet to initiate trades, and in the event of trade losses or liquidation, it is used to cover the losses before any remaining funds are returned to the trader.
On Lynx, it is also interchangeably referred to as a settlement asset because all fees and P&L from trades are 'settled' - or paid out - in terms of this asset. For example, a trader selecting BTC as collateral for a trade would earn/pay the P&L and any fees for that trade in BTC.
Lynx has the ability to support any collateral asset on its platform.
The market that a trader is going long or short on. For example, if a trader opens a short position on BTC/USD, the traded instrument would be BTC/USD. The traded instrument has no correlation with the collateral asset used, allowing traders to go long or short on BTC/USD using ETH, DAI, or even TKN as collateral.
Note: due to Lynx's use of synthetic exposure, no actual BTC/USD gets traded.
Origin chains are the blockchains on which users hold their assets and connect their wallets to use the Lynx app. For example, if a user opens the Lynx app and connects his wallet to Ethereum before starting to trade on Lynx, Ethereum would be that user's origin chain. Lynx supports numerous origin chains, allowing traders to place trades from a growing number of blockchains.
The engine chain is where Lynx settles trades, regardless of which origin chain they come from. In the example above, the user may have been connected to Ethereum when they requested to open their trades, but the actual transactions that opened those trades were submitted on Lynx's engine chain. Currently, Lynx uses Fantom as its engine chain - it possesses a fast block rate, cheap gas prices, and all the infrastructure needed to make it highly compatible for perpetual trading applications.
To learn more about Lynx's cross-chain design, read Core Design
The term "Lynx account" is adopted by Lynx to parallel the terminology and user experience observed on centralized exchanges (CEXs). Just as users are required to deposit funds into their CEX accounts prior to engaging with the platform, users on Lynx must similarly fund their Lynx accounts. However, contrary to an account held on internal CEX servers, Lynx accounts just refer to a user's wallet on the engine chain. The process of funding a Lynx account is done by bridging assets from an origin chain to the engine chain, thus ensuring Lynx remains a non-custodial, decentralized exchange where users retain full ownership over their funds at all times.
To learn more, read
A trader's position size is calculated in the following manner:
For example, a trader opening a long or short position with $1,000 USD collateral and 50x leverage would have a position size of $50,000 USD.
Gross Profit and Loss (Gross P&L) is the percentage that a trader has earned (positive) or lost (negative) on their position due solely to the performance of the traded instrument. It is calculated by simply multiplying the price change of the traded instrument by the amount of leverage used by the trader.
This percentage is measured relative to the position's collateral and does not take any fees into account. To retrieve the absolute gain or loss in terms of the collateral asset (and not in terms of a percentage), we multiply the Gross P&L by the position’s collateral. For an example and detailed view of how Gross P&L is calculated, see here.
Trading Profit and Loss (Trading P&L) is the percentage that a trader has earned or lost on their position due to the performance of the traded instrument, after accounting for funding and interest payments. Unlike Net P&L, Trading P&L does not take open and closing fees into account. Trading P&L is expressed as a percentage - either positive or negative - and is measured relative to the trader's collateral before removing the opening fee (ie. what they initially brought to Lynx).
Net Profit and Loss (Net P&L) measures how much a trader has earned or lost after accounting for all the fees owed by the trader. Net P&L is expressed as a percentage - either positive or negative - and is measured relative to the trader's collateral before removing the opening fee (ie. what they initially brought to Lynx).
Stop Loss: This parameter dictates the maximum percentage of a trader's collateral that they're willing to lose before their position gets automatically closed. For example, a trader with $1000 of collateral and a stop loss of 50% will have their position automatically closed when their Gross P&L reaches -$500 (a 50% loss in value relative to their initial collateral). By default, no Stop Loss is set.
Take Profit: The take profit parameter works similarly to the stop loss but in the upward direction. It dictates the percentage of a trader's collateral that must be earned before their position gets automatically closed. For example, a trader with $1000 of collateral and a take profit of 500% will have their position automatically closed when their Gross P&L reaches +$5000 (a 500% gain in value relative to their initial collateral). Unless otherwise specified, a Take Profit of 100% is applied. Note: While SL/TP are usually thought of as prices, Lynx displays them to users as a percentage. In the backend, these percentages are used to derive a specific price that a tradeable instrument must reach to result in the gain/loss specified in the SL/TP. This is the value recorded and used by the contracts.
lxTKN is the generic term for the receipt tokens that are issued to liquidity providers after depositing assets to any of the liquidity pools. Depending on which pool a liquidity provider deposits into, they might receive lxDAI, lxETH, lxBTC, etc. These lxTKNs represent an LPs share of the pool they deposited liquidity into, and are exchanged for the underlying asset when they go to withdraw their deposited assets.
Read more about lxTokens and providing liquidity here.
A funding rate is a periodic payment paid by traders on the heavier exposed side of each instrument. A portion of the funding rate is sent to a reserve fund, while the remainder is received by traders on the less exposed side of that instrument, incentivizing equal open interest between long and short positions. The funding rate is intended to help balance open interest across long and short traders to reduce LPs' counterparty risk.
If the funding rate is positive, then long position traders are dominant and pay funding to short traders; if the funding rate is negative, then short position traders are dominant and pay funding to long traders.
Pool Utilization refers to the percentage of a liquidity pool that's being occupied across all open positions. For example, if a liquidity pool has $10M in it and $6M are reserved to cover the potential profits of open trades (as determined by the TP set in those trades), the utilization of the pool would be 60%. Pool utilization for each liquidity pool is calculated as: