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Glossary

Market making, along with algorithmic trading generally, entails specific terminology. We define some of the most commonly used terms below.

Term Definition
base currency The currency in a currency pair whose quantity is fixed as a single unit in a price quote.

For example, in a price quotation of ETH/DAI 100, ETH is the base currency and 100 is the amount of DAI exchangeable for each unit of ETH.
centralized exchange (“CEX”) An exchange which is operated by a central authority. In addition to order matching and broadcasting, the centralized exchange keeps custody of users’ assets.
decentralized exchange (“DEX”) An exchange which is operates in a decentralized way, using smart contracts to facilitate the transacting in and settling of assets. Generally, one distinguishing feature of a decentralized exchange is that participants keep custody of their own assets in their own wallets; the DEX facilitates the direct wallet-to-wallet settlement between counterparties in a transaction.
maker A party that places maker orders, and in doing so, provides liquidity to the market.
maker order A “limit order”; which is an order to buy or sell an asset at a specified price and quantity. Execution of this order is not guaranteed; the order is only filled if there is a taker that accepts the price and quantity and transacts.
order book A list of currently available (maker) orders on an exchange, showing all of the current buyer and seller interest in an asset.
quote currency The currency in a currency pair whose quantity varies and whose quantity is denoted by the numerical figure of the price quote.

For example, in a price quotation of ETH/DAI 100, DAI is the quote currency and 100 units of DAI are referenced in this exchange.
taker A party that places taker orders, which execute immediately and fill a maker order.
taker order A “market order”; an order to buy or sell a specified quantity of an asset which is filled immediately at the best available price(s) available on the exchange.
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