The trading of a coin or crypto derivative, where the price spread between two different markets or exchanges for the same asset or product is utilized to earn greater profits.
In DeFi, automated yield farming uses algorithmic arbitrage strategies to maximize returns for investors. These arbitrage strategies may include buying, selling, lending, and/or providing liquidity of one or more digital assets, often in the same day.
An Automated Market Maker (AMM) is a decentralized asset trading pool that enables market participants to buy or sell cryptocurrencies. AMMs are non-custodial and permissionless in nature. Most AMMs utilize either a constant product, constant mean, or constant sum market-making formula; however, the most common is a constant product market maker, most notably Uniswap.
Dapps are open-source protocols that exist on a P2P blockchain such as Ethereum and can support smart contracts.
Gas fees are rewards paid to Proof Of Work miners to incentivize them to support the network's transactions which become written to the blockchain. In Ethereum, this gas fee unit amount is expressed in gwei. Withdrawals or transfers to or from CEXs, DEXs Liquidity Pools, and Wallets all incur a gas fee. The amount of this gas fee will vary in cost depending on supply and demand. As currently designed: when demand on Ethereum or an ERC-20 network is at its highest, gas fees are at also their highest.
Liquidity pools are a collection of assets that facilitates decentralized trading and lending. Users that provide liquidity (LPs) take a small fee of each trade that occurs in their liquidity pool. In the case of Polymarket, a liquidity pool would consist of YES and NO shares. LPs add pairs of YES and NO to the pool and get a fee for each trade, proportionate to the total liquidity pool.
Polygon is an Ethereum-compatible sidechain, intended to improve the scalability of decentralized applications as a whole. Polymarket is one of the many dapps that is built on Polygon's growing ecosystem.
Outcome tokens (outcome shares) represent a position in an information market and are redeemable for $1 or $0 depending on if the market resolves favorably or unfavorably.
Scalar markets are a unique type of market that predicts where a value will fall between a specified range rather than one outcome or another.
External slippage is when outcome token prices change because another user submits an order right before another order. Larger orders tend to shift prices more, so there are safeguards on Polymarket to cancel an order if there is too much external slippage.
Internal slippage is the change in prices due to a user's own order. Larger orders and low-liquidity markets tend to shift prices unfavorably.