Glossary

A smart contract holding a pool of two assets that sets prices by a predefined formula rather than from participants' orders.

A user trades not with a specific person but with the pool: they deposit one asset and withdraw the other, and the price is set by the ratio of the reserves. According to the Uniswap documentation, Uniswap v2 uses the constant product formula x·y=k: the larger a trade is relative to the reserves, the more it moves the price. The model works without market makers or an order book, but the pool's price follows the outside market only through arbitrage, and its depth is limited by the size of the reserves.

ExampleHypothetical example: a pool holds 10 ETH and 20,000 USDC, so k = 200,000. To withdraw 1 ETH, a trader has to deposit enough USDC for the product to stay the same with 9 ETH left, which means bringing the reserve up to 22,222 USDC — about 2,222 USDC instead of the 2,000 implied by the starting ratio (before the pool fee).

A last-resort measure in which participants' positions are forcibly closed to prevent bad debt on the side of a counterparty or venue.

ADL is used when ordinary liquidation is not enough: the market moves too fast, and losses are no longer covered by the losing side's collateral. The Omni documentation names the liquidation of OLP itself as the functional equivalent of ADL: the user's position is closed at the settlement price plus a reward equal to the liquidation penalty paid by OLP. According to the documentation, this can happen during extreme volatility or severe liquidity constraints at OLP. For the user, this means a position can be closed without their decision, even if it is profitable.

A losing side's loss that exceeds its collateral and cannot be recovered, so the winning side does not receive part of its profit.

Bad debt arises when the price moves so fast that liquidation cannot close a position before the collateral runs out. On a centralized exchange, such a loss is usually covered by an insurance fund or spread among participants. The Variational documentation says that in the peer-to-peer model, collateral in the settlement pool is the only source of payouts: there is no outside insurer, and a bankrupt counterparty cannot be made to add funds. It also states that if OLP became insolvent, users' future PnL would become bad debt.

ExampleHypothetical example: a counterparty has 100 USDC in the pool, and its loss after a sharp move is 150 USDC. The winning side can receive only 100 USDC; the remaining 50 USDC is bad debt.

A project's public commitment to pay rewards to researchers who responsibly report the vulnerabilities they find.

A program complements audits: the code is examined not only at the time of an audit but continuously, and researchers have a legitimate way to report a problem instead of exploiting it. The terms usually define which contracts and systems are in scope, which classes of vulnerabilities are accepted and the range of payouts. Having a program does not mean there are no vulnerabilities. According to the Variational documentation, the project's program runs on the Immunefi platform.

Assets a participant locks up against open positions, from which the participant's losses and obligations are covered.

Collateral guarantees performance: if a position loses money, the loss is deducted from the collateral, and if the collateral runs short, the position is liquidated. Where and how collateral is held matters: in a venue account alongside other clients' funds or in a segregated smart contract. According to the Variational documentation, collateral is held in USDC in settlement pools, and in Omni each user has their own pool with OLP. Only the unused balance can be withdrawn — down to the maintenance margin level.

The possibility that the other side of a trade will be unable or unwilling to meet its obligations.

On an exchange with central clearing, this risk is largely shifted to the venue and its reserves; if the venue itself goes bankrupt, as FTX did in November 2022, the risk materializes for its clients. In the peer-to-peer model, every position has an explicit counterparty, and according to the Variational documentation, there is no outside guarantor: if a counterparty's balance in the pool turns negative, the winning side cannot recover the shortfall. In Omni, the counterparty to all trades is OLP, so its solvency directly affects payouts to users.

A mode in which one shared collateral balance covers several positions at once, so profits on some positions support the others.

In cross mode, margin requirements are calculated across the whole account, so positions share a common reserve of collateral. The downside: when margin runs short, any position in this mode can be liquidated, not only the losing one. The opposite approach is isolated margin, where collateral is assigned to a single position and its liquidation does not affect the others. According to the Omni documentation, some markets allow switching between the modes, while swaps, as of October 2026, trade only with isolated margin until 24/7 trading is introduced.

A contract whose value depends on the price of an underlying asset, rate or index, but which gives no ownership of the asset itself.

Derivatives include futures, options, swaps and perpetual contracts. A participant gains economic exposure to an asset's price, and settlement is usually in cash, so the counterparty, the collateral and the settlement rules become central. This is what distinguishes a derivative from a tokenized asset, which represents a claim to the asset itself held by a custodian. In its documentation, Variational describes itself as a protocol for on-chain derivatives trading across crypto, equity, commodity and currency markets.

An arrangement in which funds are held by a neutral intermediary or a smart contract and released to the parties only when agreed conditions are met.

Escrow reduces the risk that one party fulfills its obligations while the other does not: neither party can dispose of the funds unilaterally. On a blockchain, a smart contract can act as the intermediary, in which case trust shifts from a person to the code and to whoever can change it. The Variational documentation does not use the word “escrow,” but in function the settlement pool is close to this arrangement: the parties' collateral is locked in a separate contract and distributed according to margin and liquidation rules — this is an editorial comparison, not the project's term.

A periodic payment between holders of long and short positions in a perpetual contract that anchors the contract's price to the index.

If the contract trades above the index, the rate is positive and longs pay shorts; if below, the reverse. The payment makes holding a position on the “overheated” side more expensive and so nudges the contract price toward the index. According to the Omni documentation, the rate is made up of an averaged premium to the index and a capped interest component, and the calculation window depends on the market. It is a cost or income on an open position whose size is not known in advance; for Omni swaps, according to the documentation, funding works differently and is tied to the cost of financing in traditional markets.

ExampleHypothetical example: at a rate of 0.01% per period and a position with a notional value of 10,000 USDC, the holder of the long pays the holder of the short 1 USDC for that period.

A unit measuring the computational work a transaction requires on Ethereum and compatible networks; it is paid for with a fee in the network's native token.

Each smart contract operation consumes a certain amount of gas, and the total fee equals the gas used multiplied by the gas price at the time of submission. The price depends on network congestion, so the cost of the same operation varies. Layer 2 networks lower this cost by bundling transactions into batches. The Variational documentation says that on Omni, gas for user deposits and withdrawals is paid by a protocol service component (the transactor), while users are charged, as of October 2026, a flat fee of $0.1 per deposit or withdrawal — according to the documentation, to protect against spam and cover gas.

Opening an offsetting position that reduces a portfolio's sensitivity to price moves.

A market maker that takes on a client's trade acquires directional risk and offsets it with an opposite position on another venue. A hedge costs money (the spread and fees on the outside venue, funding) and does not eliminate risk entirely: price divergence, execution delays and the risk of the outside venue itself remain. According to the documentation, OLP hedges its directional position on outside venues; the project states that only OLP's own capital is used for this and that traders' funds are not transferred to outside venues — there is no independent verification of this claim.

A reference value for the underlying asset, calculated from prices on several outside venues rather than from trades on a single venue.

An index is needed so that derivatives rely on a price that is hard to move by trading on one venue: the sources are weighted and aggregated. For perpetual contracts, the index is the reference point toward which funding pulls the contract price. In the Omni documentation, the index price for perpetual markets comes from the Variational oracle, and for swaps from traditional finance liquidity partners; for swaps, according to the documentation, the index serves only as a reference. An index is only as reliable as the quality and independence of its sources.

A market maker's right to confirm or reject a trade at the last moment, after the client has accepted its quote.

The market can move between the moment a quote is given and the moment it is accepted, and last look lets the maker avoid executing a trade at a stale price or beyond its risk limits. For the client, this means an accepted quote does not yet guarantee execution. According to the Variational documentation, in the protocol's RFQ flow, the maker's last look is the final confirmation of terms, and only after it is collateral transferred to the pool; in Omni, OLP checks the trade against its risk limits at this stage, and the price is then checked against the user's slippage limit.

A blockchain that runs on top of a main network, takes over transaction execution and relies on the main network for security.

L2s exist to lower costs and speed up transactions without fully giving up the guarantees of a main network such as Ethereum. In exchange, they introduce additional assumptions: the role of the sequencer, the contract upgrade mechanism and withdrawal delays. Independent reviewers such as L2BEAT assess these networks by how much they depend on their operators. According to the Variational documentation, the protocol's mainnet contracts are deployed on Arbitrum.

The ratio of a position's size to the collateral posted for it; it shows how many times larger the exposure is than the margin committed.

Leverage magnifies both profit and loss relative to collateral in the same proportion: with high leverage, a small price move brings a position closer to the liquidation threshold faster. The Omni documentation defines leverage as 1 / the initial margin fraction: with a 5% initial margin requirement, leverage is 20x. It also states that maintenance margin is generally half of initial margin. Leverage describes a position's risk, not its return.

ExampleHypothetical example: a position with a notional value of 1,000 USDC and a 10% initial margin requirement needs 100 USDC of collateral, which corresponds to 10x leverage.

The forced closing of a position, or part of it, when collateral falls below the maintenance margin level.

The mechanism protects the counterparty and the system from losses not covered by collateral: the position is closed while there is still enough collateral. Liquidation usually comes with a penalty, so the participant loses more than if they had closed voluntarily at the same price. According to the Omni documentation, the trigger is maintenance margin usage of 100% or more, the calculation uses a very fast moving average of the mark price, and liquidations are partial, bringing the account back to 50% of maintenance margin. As of October 2026, the penalty is 0.5%: positions are closed at the ask plus 0.5% for a short or the bid minus 0.5% for a long.

The ability to buy or sell an asset quickly in the size needed without moving its price significantly.

Liquidity is made up of depth (how much can be executed near the current price), the width of the spread and how quickly prices recover after a large trade. It is provided by participants willing to take the other side: orders in an order book, the reserves of an AMM pool or a market maker's capital. It is not unlimited: it is constrained by capital, risk limits and conditions in outside markets. The Omni documentation describes risk limits for OLP and for users that can cause a trade to be rejected — an example of how the available volume is finite.

The minimum level of collateral needed to keep a position open; once it is breached, liquidation begins.

Maintenance margin is lower than initial margin: the gap between them is a buffer that absorbs price swings after a position is opened. When collateral, including unrealized losses, falls to this level, the risk engine closes the position in full or in part. According to the Omni documentation, maintenance margin is generally half of initial margin, liquidation begins at 100% maintenance margin usage, and funds can be withdrawn from the pool only up to the balance above this requirement.

ExampleHypothetical example: at 5x leverage, initial margin is 20% of notional and maintenance margin is 10% if the “half of initial” rule applies; this ratio is given in the Omni documentation.

Collateral that a participant must post and maintain in order to open and hold a leveraged position.

There is initial margin, required to open a position, and maintenance margin, below which liquidation begins. Requirements are recalculated with every price change, so the collateral buffer is constantly shifting. According to the Variational documentation, margin requirements are set at the settlement pool level; in Omni, uniform platform requirements apply to all pools, and maintenance margin is generally half of initial margin.

ExampleHypothetical example: if the initial margin for a position with a notional value of 1,000 USDC is 10%, 100 USDC must be posted; under the “maintenance is half of initial” rule, the maintenance threshold is 50 USDC.

A calculated fair price for a contract, used to value unrealized profit and loss, margin and liquidation conditions.

The mark price is kept separate from the last trade price so that brief spikes do not trigger unnecessary liquidations. The Omni documentation describes it as a value calculated from the index price and additional data, such as funding and OLP's current risk profile. The dependence runs one way: funding is an input to the mark price, but according to the funding page, the mark price is not used to calculate the rate. For the liquidation trigger, according to the documentation, Omni uses a very fast moving average of the mark price.

A participant who continuously offers buy and sell prices, earns the difference between them and takes on the risk of the resulting position.

A market maker becomes the counterparty for those who want to trade immediately, and so provides liquidity. Its income is the spread, and its main risk is the accumulated position, which it caps with limits and hedging. According to the documentation, in Omni the sole market maker and counterparty to all trades is OLP (Omni Liquidity Provider), which hedges its directional position on outside venues. The documentation explicitly warns that OLP, like any market-making system, can incur losses.

The total size of open, not yet closed positions in a contract, counting one side of each buyer-seller pair.

Unlike trading volume, open interest shows not activity over a period but outstanding obligations at the current moment. It rises when new positions are opened and falls when they are closed. For a venue or a market maker, it is a measure of risk taken on, so it is often capped. According to the Omni documentation, markets have limits on open interest and on skew (the difference between long and short positions), set as a percentage of the base token's fully diluted market capitalization; a trade that would exceed them is rejected.

ExampleHypothetical example: A buys a contract for 1 BTC from B — open interest becomes 1 BTC, not 2. If A then transfers the position to a new participant, C, open interest stays at 1 BTC; if A and B close their positions with each other, it falls to zero.

A system that delivers outside data, most often asset prices, to a blockchain so that smart contracts can rely on it.

A blockchain cannot see what happens outside it, so prices have to be collected from venues, aggregated, signed and passed to a contract. Each step is a potential point of failure: manipulation of a source, a delayed update, an outage or a compromised signer. A BIS report notes that fully decentralizing oracles makes it harder to reach agreement, while partial centralization adds trusted parties. According to the Variational documentation, the protocol uses its own oracle, which combines weighted price feeds from different venues; the weighting methodology has not been publicly disclosed.

A price-ordered list of limit orders to buy and sell, in which opposing orders are matched according to priority rules.

Participants place orders with a price and size, and the matching engine pairs them by price and time priority; the gap between the highest bid and the lowest ask forms the spread. The model is transparent: depth is visible to everyone, and the price is formed by many participants. The limitation is that an order book needs enough orders, and in new or illiquid markets it can be “thin.” According to the documentation, the Variational protocol does not use an order book and works on the RFQ model instead.

A derivative on an asset's price with no expiry date, whose price is kept close to the index through periodic funding payments.

A regular futures contract converges with the price of the underlying asset by its expiry date; a perpetual contract has no such date, so it needs a different anchoring mechanism. That mechanism is the funding rate: if the contract trades above the index, holders of long positions pay holders of short positions, and vice versa. Positions are usually opened with margin and leverage, so margin and liquidation rules apply to them. The Omni documentation describes perpetual contracts as the application's main instrument and swaps as a separate instrument type with a different funding mechanism.

A way of making a trade in which a participant asks one or more market makers for a price and then accepts or rejects the quote received.

The taker states what it wants to buy or sell and in what size, makers respond with prices, the taker chooses a quote, and the maker gives final confirmation of the trade. Unlike in an order book, prices are not visible to everyone in advance: a quote is built for a specific request and depends on its size and the maker's risks. According to the documentation, the Variational protocol is built on RFQ and does not use an order book; Omni simplifies the scheme — OLP is the only maker, and a quote consists of a price alone, since the other parameters are set by the platform.

A layer 2 network that executes transactions off the main network and posts their data to it in batches, relying on its security.

Posting data to the main network makes it possible to reconstruct the rollup's state and verify that it is working correctly. Optimistic rollups, as ethereum.org describes them, treat batches as valid by default but allow a window for challenges; this is why a standard withdrawal to Ethereum takes about seven days. Zk-rollups instead attach a cryptographic proof of validity. Arbitrum One, where according to the Variational documentation the protocol's contracts are deployed, is an optimistic rollup.

A layer 2 node that accepts transactions, determines their order and passes them to the main network in batches.

A sequencer provides fast confirmation, but this is “soft” finality: it depends on the sequencer behaving honestly. “Hard” finality comes when the batch is recorded and finalized on the main network. According to the Arbitrum documentation, if the sequencer does not include a transaction, the transaction can be submitted through the main network (the delayed inbox) — forced inclusion with a delay. A centralized sequencer is a point of failure: if it stops, transactions can be included only by the slow path through the main network.

The stage at which the parties' obligations are actually fulfilled: money or assets pass from one side to the other.

A trade must not only be agreed but also booked, cleared — that is, the parties' obligations determined — and settled. In traditional markets, these functions are often performed by different intermediaries; in on-chain systems, some of them move into smart contracts, and the result of settlement is visible on the blockchain. According to the documentation, the Variational protocol automates the booking, clearing and settlement of derivatives; its settlement engine determines the settlement price of contracts at expiry, but Omni, which works only with perpetual contracts, does not use that part of the engine.

In the Variational protocol, a segregated smart contract that holds the parties' positions, their USDC collateral and the margin and liquidation rules.

According to the Variational documentation, pools are fully isolated: positions in different pools cannot be transferred or netted against each other, and outside participants have no access to others' funds. A pool can be bilateral or multilateral; in Omni, each user has their own bilateral pool with OLP, with parameters uniform across the platform. Isolation limits the spread of losses between pools but makes payouts dependent on the solvency of a specific counterparty: the pool's funds are the only collateral for the trades in it.

The difference between the expected price of a trade and the price at which it is actually executed.

Slippage occurs when the price changes between the decision and the execution, or when a trade is larger than what is available at the current price. The larger an order is relative to liquidity, the greater the slippage usually is. The Omni documentation defines slippage as the difference between the mark price and the execution price; users can set a slippage limit, and a market order that exceeds it is rejected. The reference point is defined differently from venue to venue, so slippage figures from different venues are not directly comparable.

ExampleExample from the Omni documentation: with a 0.5% limit and a mark price of $100, a buy order is rejected if the execution price would be $100.50 or higher.

A program deployed on a blockchain that holds funds or data and executes predefined rules without an intermediary.

A contract's code and state are public, and calls to it are recorded on the blockchain, so its operations can be verified independently. Published source code can be matched against the on-chain bytecode through verification. The rules are executed literally: a bug in the code, unsafe administrator permissions or incorrect outside data lead to real losses. The Variational documentation describes settlement pools, the OLP vault and the oracle contract, among others, as smart contracts.

A review of code by an outside team of specialists for vulnerabilities and logic errors, before or after it is deployed on a network.

Auditors read the code, model attacks and describe the issues they find in a report; the project team then fixes them or explains why it is leaving them as they are. An audit covers a specific version of the code as of the review date: later changes, deployment settings, administrator keys and external dependencies are outside its scope. According to the Variational documentation, the protocol has been audited by Zellic (completed in December 2024) and Spearbit (completed in March 2025), and the reports are published on a documentation page. An audit reduces, but does not eliminate, the risk of bugs in the code.

The difference between the price at which an asset can be sold (bid) and the price at which it can be bought (ask) at the same moment.

The spread is the price of immediate execution, collected by the liquidity provider. It is wider in illiquid markets, during volatile periods and for large trades, because the market maker builds in its risk and hedging costs. Even with no trading fee, the participant bears this cost. According to the Omni documentation, OLP earns the spread, and as of October 2026, 20% of the spread goes to the protocol treasury; the documentation notes that this share is being tested and may change.

ExampleHypothetical example: if a maker is willing to buy at 99.9 and sell at 100.1, the spread is 0.2, or about 0.2% of the midpoint price of 100.

A token whose value is pegged to an outside reference, most often the US dollar, through issuer reserves or an algorithm.

Stablecoins are used as a unit of account and as collateral in crypto infrastructure because their price fluctuates less than that of other crypto assets. The peg is not guaranteed: for fiat-backed stablecoins, the risk lies with the reserves and the issuer, which can also freeze tokens; for algorithmic ones, with the resilience of the mechanism. According to the Variational documentation, collateral in settlement pools and settlement of Omni instruments are denominated in the USDC stablecoin, so this token's risks carry over to positions.

A derivative agreement to exchange payments calculated on different bases; in the Omni documentation, a derivative that tracks an asset's total return.

In traditional finance, a swap is an exchange of cash flows, such as a fixed rate for a floating one or an asset's return for a financing charge. According to the Omni documentation, a swap is a linear, USDC-settled derivative that seeks to track the total return of the underlying asset, trades bilaterally and draws liquidity from traditional financial institutions; funding accrues once a day based on the actual cost of financing (for example, SOFR plus a spread), and dividends are passed through to positions. As of October 2026, swaps on Omni do not trade around the clock. In DeFi, “swap” also refers to a simple exchange of one token for another — a different concept.

Issuing a token on a blockchain that represents a claim to an asset held off-chain, such as a security, a commodity or money.

A token makes a claim to an asset transferable and programmable, but the claim itself depends on the issuer and the custodian, as well as on the legal structure of the issuance. The IOSCO final report on tokenization (November 2025) notes that investors may not understand whether they own the underlying asset or only the token, and points to counterparty and technology risks. A tokenized asset should be distinguished from a derivative: a derivative provides price exposure under a contract with a counterparty, not a claim to the asset itself.