> For the complete documentation index, see [llms.txt](https://altodex.gitbook.io/docs/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://altodex.gitbook.io/docs/additional-resources/glossary.md).

# Glossary

#### **Collateral**

Assets pledged by a trader to back up leveraged positions. Collateral protects against loss and creates margin health. Alto accepts a variety of collateral, including ETH, BTC, stablecoins (USDC, USDT, and DAI), and eventually tokenized real-world assets (RWAs).

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#### **PnL (Profit and Loss)**

A measure of trading performance:

* **Unrealized PnL**: Gains or losses on an open position, fluctuating with market prices.
* **Realized PnL**: Gains or losses locked in after a position is closed.

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#### **DAO (Decentralized Autonomous Organization)**

a governance structure in which token owners, not a centralized authority, make decisions. The AltoDAO oversees protocol upgrades, treasury allocation, voting, and proposals in Alto.

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#### **Dutch Auction**

An equitable liquidation process in which a liquidated position is put up for auction at a premium and then the price drops gradually until bidders intervene. This maintains transparency and stops bots from controlling liquidations.

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#### **Leverage**

Borrowed exposure that allows traders to control larger positions than their collateral. For instance, using $1,000 in collateral to control $10,000 in exposure is known as 10x leverage. Adaptive leverage, which Alto employs, scales according to trader risk history and volatility.

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#### **Margin Ratio**

The percentage that measures a trader’s collateral relative to their position size.

* A high margin ratio = safer position.
* A low margin ratio = closer to liquidation.

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#### **Liquidation**

When a trader's margin drops below the maintenance threshold, the position is forced to close. Dutch auctions are used to handle this process on Alto, and the trader receives their surplus collateral back.

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#### **Vaults**

Liquidity pools where LPs deposit assets to support trading. Alto offers three types:

* **Delta-Neutral Vaults**: Hedged, low-risk.
* **Directional Vaults**: Take long/short market exposure.
* **Volatility Vaults**: High-risk, high-reward during volatile markets.

Vault shares are tokenized as ERC-20s, enabling composability in DeFi.

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#### **Flat Service Fee**

A clear, set fee associated with starting, maintaining, or ending a job. Alto is Shariah-compliant because it avoids interest-like structures by using flat fees instead of percentage-based funding.

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#### **Oracles**

The protocol receives asset prices from decentralized data feeds. In order to guard against manipulation, Alto uses Chainlink as its main oracle with TWAP (time-weighted average price) backups.

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#### **Governance Token ($ALTO)**

The Alto ecosystem's native token. It offers LP incentives, fee reductions, and governance rights. Deflationary buybacks, capped supply, and gamified incentive schemes are examples of tokenomics.

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#### **Adaptive Leverage**

A system where leverage limits adjust dynamically:

* Higher leverage in calm markets.
* Lower leverage in volatile markets.
* Skilled, responsible traders can unlock higher caps over time.

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#### **Ethical Mode**

Shariah-compliant trading is made possible by an optional toggle. Features include only asset-backed markets, transparent risk parameters (no gharar), and flat fees (no riba). Shariah advisors provide oversight.