Glossary

Terms

AMO (Automated Market Operations)

An automated market operation that is triggered when a condition is met. Shadow's AMO system captures market inefficiencies when the x33 floor or ceiling is reached, executing systematic arbitrage and distributing 100% of proceeds to x33 vault voters to ensure value stays within the protocol.

Asset

Digital tokens used in Shadow Exchange. These include ERC-20 tokens for trading and ERC-721 NFTs that represent concentrated liquidity positions.

Automated Market Maker

A smart contract on Sonic that holds liquidity reserves. Users can trade against these reserves at prices determined by a fixed formula. Anyone can contribute liquidity to earn emissions and liquidity incentives.

Concentrated Liquidity

A liquidity provision mechanism where providers can specify custom price ranges for their assets. Learn more here.

Core

Essential smart contracts for Shadow's functionality. Contracts that handle critical functions like swaps, liquidity management, and fee collection. View the core contracts here.

DEX Trilemma

The challenge of aligning incentives between traders, liquidity providers, and token holders in decentralized exchanges. Various models attempt to solve this by creating balanced incentives for all participants.

Epoch

A 7-day period that resets every Thursday at 00:00 UTC. During each epoch, xSHADOW stakers vote on liquidity pools to direct emissions, and rewards are distributed based on voting results.

ERC20

Fungible token standard.

Exit Rebase

A unique mechanism where tokens forfeited through early exits are streamed to existing stakers. This serves as both dilution protection and additional incentive for active participants.

Factory

The smart contracts responsible for deploying new trading pairs and pools.

FeeM (Fee Monetization)

Sonic's innovative program that returns 90% of gas fees generated by protocols back to developers. Shadow leverages this to enable frequent dynamic fee adjustments and MEV protection without cost concerns.

Gauge

A smart contract that distributes rewards to LP tokens based on voting distribution.

Impermanent Loss

The potential loss that liquidity providers face when the price of assets in a pool changes relative to when they were deposited. This is a risk inherent to providing liquidity.

Invariant

The k in x*y=kand xy(x² + y²) = k formula. Learn more here.

Limit Order

An order to buy or sell tokens at a specific price or better. The order only executes when the market reaches the target price, giving users control over execution timing and price. Learn more here.

Liquidity

Assets in Shadow pools/pairs available for trading.

Liquidity Provider / "LP"

Users who pair and pool ERC20 tokens. Liquidity providers assume price risk and are compensated with emissions and liquidity incentives.

metaDEX ve(3,3)

The original vote-escrow model that introduced time-weighted voting and aligned incentives between all exchange participants. While revolutionary, it relied on forced lock-ups and lacked exit mechanisms. Shadow's x(3,3) model builds upon this and improves this concept by removing forced lock-ups.

MEV (Maximal Extractable Value)

Value that can be extracted from block production by including, excluding, or changing the order of transactions. Shadow's MEV module captures this value and redistributes it back to protocol participants.

Pair

A smart contract created by Shadow's V2 factory that enables ERC20 trading. Learn more

Pool

A smart contract created by Shadow's V3 factory that enables trading between two ERC20 tokens. Each token pair can have multiple pools with different fee tiers, which adjust dynamically based on market volatility. Learn more here.

Position

A liquidity allocation in a V3 pool defined by a specific price range and amount. Each position is represented as an NFT and can be managed independently. Learn more here.

Price Impact

The effect a trade has on an asset's price due to the size of the order relative to pool liquidity. Larger trades typically result in higher price impact.

Range

An interval between two ticks of any distance.

Range Order

Limit order approximation using single-asset liquidity provision. Learn more here.

Rebase

An anti-dilution mechanism that adjusts token balances to maintain proportional ownership. In traditional ve(3,3) systems, this prevents locked positions from being diluted by emissions.

Slippage

Price change between trade submission and execution.

Spot Price

The current exchange rate between two assets in a pool, calculated from the pool's reserves before any trade occurs.

Swap Curve (Uni-v2 or Correlated)

The AMM formula that determines trade prices in pairs. Shadow uses two curves: volatile (x*y=k) for standard token pairs, and stable (xy(x² + y²) = k) for correlated assets. Learn more here.

Swap Fees

Trading fees paid to xSHADOW stakers. Fees vary algorithmically.

Tick

Discrete boundaries in price space.

TWAP

Time-weighted Average Price order that breaks large trades into smaller chunks executed over time to minimize price impact. Use TWAP when trading large amounts or during volatile periods. Learn more here.

Vote Escrow (ve)

A governance system where voting power is determined by both token amount and lock duration. This creates a risk vs. reward scenario where longer locks provide more governance power.

Vote Incentive

Rewards offered to xSHADOW holders to incentivize voting on gauges. These incentives help direct emissions to desired liquidity pools.

x(3,3)

Shadow's improved version of the metaDEX model that eliminates forced lock-ups and incentivizes participation with strong rewards. Users can exit anytime with penalties that benefit remaining participants, creating a dynamic system driven by genuine value creation rather than artificial scarcity.

xSHADOW

xSHADOW is a non-transferable representation of 1 unit of SHADOW held in escrow. It allows holders to vote on emissions distribution, earn protocol fees, and receive vote incentives. Unlike traditional ve-tokens, xSHADOW can be exited anytime, with exit penalties distributed to remaining stakers as rewards.

$x33

The liquid staked version of xSHADOW that automatically handles voting and reward claims. The $x33:xSHADOW ratio increases over time as rewards accrue, providing instant liquidity while maintaining all benefits.