An automated market maker (AMM) is a type of decentralized exchange (DEX) protocol that relies on a mathematical formula to price assets.
Instead of using an order book like a traditional exchange, assets are priced according to a pricing algorithm. This formula can vary with each protocol.
Uniswap uses x * y = k
x is the amount of one token in the liquidity pool,
y is the amount of the other token in the liquidity pool,
k is a fixed constant.
Uniswap use a constant product market maker algorithm that makes sure that the product of the quantities of the 2 supplied tokens always remains the same.
Liquidity pools are pools of tokens that are locked in a smart contract. They are used to facilitate trading by providing liquidity and are used by some of the decentralized exchanges (DEX).
In its basic form, a single liquidity pool holds 2 tokens and each pool creates a new market for that particular pair of tokens (for example ETH/USDC).
"The concept of a flash loan was first termed by Max Wolff, the creator of Marble Protocol in 2018." - Dragonfly Research, "Flash Loans: Why Flash Attacks will be the New Normal", Feb 27th, 2020
A flash loan is a loan that is paid back within the same transaction in which it was borrowed.
By checking whether or not a set of smart contract calls within a transaction will definitively return the money borrowed from the contract being flash loaned from, defi applications such as Aave, and Uniswap are able to loan money with no collateral, but risk-free while earning a guaranteed premium. [Source: https://docs.aave.com/faq/flash-loans]
This provides an enormous amount of "free" liquidity available to the market in a way unlike has ever been seen before in the traditional finance world that can be used to arbitrage tokens between dexes, free up collateral, rebalance leveraged portfolios on dApps, and many other things we have yet to dream up.
In short: A flash loan is a no-risk, zero-collateral loan available to anyone to take on a permissionless, decentralized, smart-contract based blockchain like Ethereum.
Ethereum 2.0 is centered around the idea of a Beacon chain that synchronizes multiple Ethereum chains, which are referred to as shards.
This approach to solving the "scaling problem" [Increasing the throughput of data on the network] preserves the decentralized, trustless nature of the Ethereum blockchain while drastically increasing the throughput of the network as new "shards" are added to the network and synchronized by the beacon chain.
The beacon chain's primary function is merely the synchronization and consensus of the states of the various shard chains underneath it through a proof of stake [as opposed to proof of work in the original Eth blockchain design] consensus algorithm.
Ethereum 2.0 is planned to launch in multiple phases -
In phase 0: The Beacon chain is launched and layer 1 ETH [The current ethereum network's native token] is burned to mint ETH on Layer 2 [The beacon chain]. This ETH is staked with validators: 32 ETH per validator, and they begin the proof of stake consensus of the Beacon chain, which at this point will not actually do much else.
In phase 1: Layer 1 is incorporated as a shard under the beacon chain and other shards are tentatively added to test and develop sharding logic. At some point during this phase mining rewards will begin to be scaled down and confidence in the sharding logic will eventually progress to the point that the network moves to phase 2 [final implementation] of Ethereum 2.0.
Phase 2: The shard chains begin to interoperate through the beacon chain and consensus is achieved across all shards. Throughput is massively increased, transaction fees decline a lot, the network becomes less congested, and mass adoption becomes truly possible for Ethereum.
Of course, all of this is highly simplified and I encourage you to view this source for further reading about the technicalities of the different phases to get a good grasp on how it all works:
Ali Atiia described it as such:
An optimistic rollup chain is really just (1) a smart contract on some layer-1 chain like Ethereum mainnet and (2) block producer(s) that listens for transactions on a dedicated P2P network, batch them up into one big string of data, and post it to layer-1 along with a signature attesting to their validity. This attestation can and will be used against them in the court of the ORU smart contract if they commit fraud.
The contract accepts transaction directly from users in case the Operator is censoring. That allows a user to exit the ORU safely with their funds if the Operator goes rogue or unresponsive. And importantly, the contract can verify fraud claims and slash the operator’s bond if indeed there was fraud.
It must be the case that the data attached to an ORU transaction is all a whistle-blower needs to detect and report fraud. Layer-1 full nodes never execute what’s inside the attached data (unless someone reports fraud) and that is where the scalability gain comes from. To layer-1, that data is just a binary blob to be stored forever.
Proof-of-stake (PoS) is a consensus mechanism used by some blockchains. Users with staked token in the network can partecipate to the convalidation of the blocks and to receive rewards for this.
The right to validate a block and receive rewards is generally awarded by a protocol and is based on the proportional staked value.