# Glossary

Short definitions for terms used in the Mento V3 docs. For full context, see [Overview](https://docs.mento.org/mento-v3/get-started/readme) and [FPMMs](https://docs.mento.org/mento-v3/dive-deeper/fpmm).

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| Term                                      | Definition                                                                                                                                                                                                                                                                             |
| ----------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |
| **AMM** (automated market maker)          | A pool that sets swap price by a rule (e.g. formula or oracle) rather than an order book.                                                                                                                                                                                              |
| **CFMM** (constant-function market maker) | An AMM whose **trading function** depends only on **reserves** (e.g. constant product xy = k). Price is derived from reserves and moves only when someone trades; no oracle in the rule. LVR and slippage arise from this design.                                                      |
| **CDP** (collateralized debt position)    | A position where you deposit collateral and borrow a stablecoin. Used for synthetic Mento stables.                                                                                                                                                                                     |
| **Circuit breaker**                       | A rule that can halt trading when conditions are abnormal (e.g. oracle stale, price move too large). In V3, BreakerBox and OracleAdapter gate when the pool accepts swaps.                                                                                                             |
| **DEX** (decentralized exchange)          | A place to swap tokens without a central custodian; trades are executed by smart contracts.                                                                                                                                                                                            |
| **FPMM** (Fixed-Price Market Maker)       | An AMM where the swap price is fixed to an external **oracle** rate (minus fee). No reserve-based curve; no curve slippage; no LVR from a stale pool price.                                                                                                                            |
| **FX** (foreign exchange)                 | Exchange of one currency or currency-like asset for another at a rate (e.g. USDC/USDm, EUR/USD).                                                                                                                                                                                       |
| **Invariant**                             | A quantity the protocol keeps unchanged by every allowed operation. In V3 FPMMs: **I = V / S** (value at oracle per LP share). This holds under all operations **when we ignore fees and incentives**; in practice, swap fees and the rebalance incentive affect the exact accounting. |
| **Liquidity strategy**                    | A smart contract allowlisted by a pool that can call the pool's rebalance function (e.g. Reserve, CDP).                                                                                                                                                                                |
| **LVR** (loss-versus-rebalancing)         | In curve-based AMMs, loss to LPs when arbitrageurs trade against a stale pool price. In an FPMM the pool always quotes the oracle, so LVR from a stale curve is zero.                                                                                                                  |
| **Mento stables**                         | Mento stablecoins: USDm, EURm, GBPm, and others. Track fiat; obtainable via swap (FPMM) or borrow (CDP).                                                                                                                                                                               |
| **Oracle**                                | An external price feed the protocol trusts. In V3, each pool uses an oracle to set the swap rate.                                                                                                                                                                                      |
| **Rebalance**                             | When the pool's reserve ratio drifts from the oracle, an allowlisted **liquidity strategy** can take one token from the pool and return the other at the oracle rate (capped incentive).                                                                                               |
| **Reserves**                              | The two tokens held by a pool. Swaps change composition; **value at oracle** is preserved (minus fees).                                                                                                                                                                                |
| **TradingLimitsV2**                       | Mento V3 mechanism: caps on per-token net flow over 5-minute and 1-day windows. Limits how much the pool can be drained in one go. (TradingLimits v1 applied to Mento V2.)                                                                                                             |
| **Value protection**                      | Rule that every swap must not decrease the pool's **reserve value at the oracle** (after fees). If the oracle is wrong and trading is not halted, value can still be extracted.                                                                                                        |

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**See also:** [Overview](https://docs.mento.org/mento-v3/get-started/readme) · [FPMMs](https://docs.mento.org/mento-v3/dive-deeper/fpmm) · [Oracles & circuit breakers](https://docs.mento.org/mento-v3/dive-deeper/fpmm/oracles-and-circuit-breakers).