Key Concepts

This page explains the core DeFi concepts used throughout UnitFlow Finance.

Automated Market Maker (AMM)

UnitFlow uses an AMM model — liquidity is pooled in smart contracts rather than matched via an order book. Prices are determined algorithmically based on the ratio of tokens in each pool. The v2.5 implementation uses the constant-product formula: x × y = k.

Liquidity Pool

A liquidity pool is a smart contract holding reserves of two tokens. Traders swap against these reserves; liquidity providers (LPs) deposit token pairs and receive LP tokens representing their share of the pool.

LP Tokens

When you add liquidity, you receive ERC-20 LP tokens proportional to your contribution. These tokens can be redeemed at any time to withdraw your share of the pool's reserves, including any accumulated trading fees.

Slippage

Slippage is the difference between the expected price and the executed price of a trade. It occurs because on-chain prices change between when a transaction is submitted and when it is confirmed. UnitFlow lets you set a slippage tolerance (default 0.5%).

Degen Mode

A toggle in the swap settings that raises the maximum slippage from 50% to 99%. Intended for volatile tokens, low-liquidity pools, or tax tokens that require higher tolerance. Use with caution — high slippage exposes trades to front-running and MEV.

Price Impact

The effect a trade has on the pool's price. Large trades relative to pool size cause significant price impact. The swap UI displays the estimated price impact before confirmation.

Multi-hop Routing

When no direct pool exists between two tokens, the router finds a path through intermediate tokens (e.g., Token A → USDC → Token B). UnitFlow's graph-based router supports up to 3 hops and selects the route that maximises output.

Concentrated Liquidity (V3)

V3 allows LPs to concentrate their capital within a specific price range, earning more fees per unit of capital when the price trades within that range. Positions are represented as NFTs rather than fungible LP tokens.

Singleton Pool Manager (V4)

V4 uses a single PoolManager contract to manage all pools, reducing gas costs. It also introduces a hooks system that allows custom logic to be attached to pool lifecycle events (before/after swap, before/after liquidity changes).

Tax Token

A token that automatically deducts a percentage fee on buy and/or sell transactions. UnitFlow's Token Factory supports deploying tax tokens with configurable buy/sell tax rates (in basis points) and a designated tax wallet.

NFT Gating

Access to the DEX is restricted to wallets holding a minimum number of Genesis and Activity NFTs. This is enforced client-side by reading the NFT contract on wallet connection. Whitelisted addresses bypass this check.

CCTP (Cross-Chain Transfer Protocol)

Circle's protocol for burning USDC on one chain and minting native USDC on another. UnitFlow's bridge uses CCTP to move USDC between Arc Testnet and other supported EVM chains.