# Glossary

### Delta-neutral

A trading strategy where positions are hedged to offset price movements, resulting in zero net exposure to market volatility. Market Makers use delta-neutral hedging to manage risk during swaps.

### IBC (Inter-Blockchain Communication)

A protocol that enables different blockchain networks to exchange data and assets in a secure and standardized way. It's the foundation for cross-chain communication in the Universal Outposts system.

### IBC Client (or Light Client)

A component that lives on top of the network where the outpost resides. It can verify the history of the Oracle Layer trustlessly. Since blockchains cannot communicate directly with the external world (e.g., making HTTP requests), the IBC client starts with a trusted state (genesis) and can then, given compressed data of the Oracle Layer (headers), track the history of the chain. The history primarily consists of state roots, which are fingerprints of the Oracle Layer state used to prove the value of a certain portion of state.

### Impermanent Loss

The temporary loss of value experienced by liquidity providers due to price changes in pooled assets compared to simply holding the assets. Bolt’s pool design aims to eliminate this risk.

### Outpost

An implementation of Bolt that receives and utilizes the price data from the Price Oracle on a native chain. Outposts implement the necessary components to verify and integrate the received price information.

### State Root

A cryptographic hash that represents the entire state of a blockchain at a specific point in time. It's used as a reference point for proving the inclusion of specific data in the blockchain's state.

### Merkle Proof

A cryptographic proof that allows for efficient and secure verification of the contents of large data structures. In the context of blockchain, it's used to prove that a specific transaction or state is part of a given block or state root.

### Order Settler

An entity (often a Market Maker) responsible for monitoring Outposts, executing offsetting trades, and settling orders to ensure efficient liquidity and execution.

### Proof of Pricing Efficiency (PoPE)

A cryptographic proof emitted by validators to verify that trades are executed at the best available market rate. PoPE ensures price accuracy and execution quality across Bolt Outposts.

### Price Oracle

The system providing the prices, in this case, the Bolt Liquidity Price Oracle in the form of PoPE's. It acts as the authoritative source of price data for the entire ecosystem taking into account a range of pricing data from various sources (CEXs & DEXs).

### Slippage

Slippage refers to the variance between the quoted execution price of a trade and the final price at which it settles. On DEXs and order book systems, slippage arises primarily from:

* Liquidity depth: When available liquidity at the quoted price is insufficient, orders must be executed across multiple price levels (order books) or along the price curve (AMMs), resulting in a worse average execution price.
* Market volatility: Price movements occurring between order submission and on-chain confirmation can cause trades to settle at less favorable rates.
* Execution mechanics: In AMMs, the constant product or bonding curve adjusts the marginal price as trade size increases relative to pool reserves; in order books, large trades may consume multiple resting orders.

Formally, slippage is expressed as a percentage deviation from the expected execution price:

<figure><img src="https://516405380-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2FR9i6OD499DaKDtbTOynt%2Fuploads%2FNYqoS2DIUqkMwMi4wLpr%2Fslippage.png?alt=media&#x26;token=bfa5cd79-ad70-44cf-9e78-ef3d176e315b" alt=""><figcaption></figcaption></figure>

In practice, slippage represents the implicit cost of trading in environments where liquidity or execution speed is constrained.

### Single-sided, Multi-quote Liquidity Pools

A liquidity pool structure where LPs provide only one base asset, which can be traded against multiple quote assets. This design eliminates impermanent loss and prevents liquidity fragmentation.

### Relayer

An off-chain process that facilitates the transfer of IBC packets between chains. It monitors for events on both chains and submits the appropriate transactions to relay data.
