> For the complete documentation index, see [llms.txt](https://docs.ekubo.org/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.ekubo.org/concepts/key-concepts.md). # Key concepts ## Protocol concepts ### Automated Market Maker (AMM) A decentralized finance protocol that lets users trade against pooled liquidity at algorithmically determined prices, allowing liquidity providers to automatically "buy low, sell high." AMMs differ primarily in the amount of customization available to liquidity providers. Depositing into an AMM is a bet that trading fees will outweigh the loss due to price divergence of the two assets in a pair. ### Constant product The `x*y=k` formula that forms the basis of most AMMs, where `x` is the amount of one token (`token0`), `y` is the amount of the other (`token1`), and `k` is held constant as users trade with the pool. This formula is how trades are computed on Ekubo within regions of constant liquidity — see the [pool math](/reference/pool-math.md). ### Concentrated liquidity The main feature that allows Ekubo to provide better pricing than other AMMs. In simple constant-product AMMs, deposited capital backs trading at every possible price — including unrealistic ones — so most of it sits unused. Concentrated liquidity lets you choose the price range each position trades in. If you think ETH will only trade between 1,800 and 2,200 USDC, you can provide liquidity in just that range and deploy the rest of your capital elsewhere — or concentrate more capital into the range. Concentration cuts both ways: it raises fees earned per dollar while the price is in range, and equally amplifies divergence loss when the price moves. It does not make providing liquidity more profitable on its own. **Capital efficiency** measures this concentration: how much more capital a full-range position would need to match a concentrated position's depth at the current price. It describes how the same exposure is expressed with less principal — not a higher expected return. ### Ticks Ticks are the discrete price points that can serve as position boundaries. Ekubo divides the price range logarithmically: tick `i` corresponds to the price `1.000001^i`, so each tick is 1/100th of a basis point — finer precision than most centralized limit order books. One-tick positions behave like limit orders, which makes Ekubo suitable as an on-chain order book. **Tick spacing** is the minimum distance between the ticks a pool's positions may use, and is set per pool. Smaller tick spacing allows tighter ranges; larger tick spacing makes swaps cheaper to compute. Volatile pairs, where tiny price differences don't matter, are better served by a larger tick spacing. ### Flash accounting All token balance accounting happens inside Ekubo before any tokens are transferred: you can trade with many pools and update many positions, then settle only the net difference at the end. This is what the ["till" pattern](/concepts/architecture.md) enables, and it is why multi-pool routing on Ekubo is cheap. ## Platform concepts ### Ethereum [Ethereum](https://ethereum.org/en/) is a blockchain that supports "smart contracts": autonomous programs that anyone can deploy and use. Ekubo Protocol V3 is deployed to Ethereum mainnet and many EVM-compatible networks — at the same contract addresses on every chain. ### Layer 2 A network that uses Ethereum to provide a more scalable platform without sacrificing decentralization or security. Sites such as [L2BEAT](https://l2beat.com/) track L2s and score them along multiple dimensions. Several of Ekubo's deployment chains (Arbitrum, Base, Optimism, Robinhood Chain, Starknet) are Ethereum L2s. ### Starknet Starknet is a Layer 2 that scales Ethereum using STARK [zero-knowledge proofs](https://en.wikipedia.org/wiki/Zero-knowledge_proof), which let Ethereum verify the correctness of Starknet state transitions without re-executing every transaction. Starknet contracts are written in [Cairo](https://www.cairo-lang.org/), so ordinary Ethereum wallets are not compatible; wallets such as [Ready](https://www.ready.co/) and [Braavos](https://braavos.app/) work with Starknet. Ekubo's original deployment is on Starknet. --- # Agent Instructions This documentation is published with GitBook. GitBook is the documentation platform designed so that both humans and AI agents can read, navigate, and reason over technical content effectively. 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