🔤Glossary
Lending Pools
Deposits are grouped by assets in Lending Pools, used to grant Collateralized Loans to Borrowers.
Collateral Pool
Borrowing from Lending Pools requires to lock a certain value of assets (LP Tokens) in a Collateral Pool. These assets will be used to repay loans in the case of a liquidation.
Indirect Liquidity Providing
A liquidity provision strategy where depositors receive passive income while transferring risk and complexity to experienced liquidity providers (Borrowers)
Leveraged Liquidity Providing
A liquidity provision strategy where experienced liquidity providers (Borrowers) can optimize their capital usage and multiply their returns by accessing extra funding at a reduced cost.
Liquidity-Pool Token (LP Token)
LP Tokens are minted by Decentralized Exchange and sent in counterparty when depositing assets in liquidity pools. Deposited assets can then be withdrawn in exchange for these LP Tokens.
Utilization Rate (U)
The percentage of actually borrowed funds in the lending pool compared to the total funds available for borrowing.
Collateral Factor (CF)
Collateral Factor (CF) is the ratio between the value of the collateral and the value of the loan.
Liquidation Threshold (LT)
The Liquidation Threshold is the ratio above which the Collateral Factor must be maintained to avoid liquidation. When CF<LT, the liquidation process is triggered.
Balanced Liquidation Threshold (BLT)
BLT is the liquidation threshold that applies when a loan replicates the asset split of its collateral. Typically, a loan 50% in asset A and 50% in asset B when using a LP Token A/B from Uniswap v2.
Unbalanced Liquidation Threshold (ULT)
ULT is the liquidation threshold that applies when a loan is composed of only one of its collateral underlying tokens. Typically, a loan 100% in asset A when using a LP Token A/B from Uniswap v2.
Liquidation Discount (LD)
When determining the liquidation threshold, a Liquidation Discount is applied to the collateral price in order to take into account potential liquidation costs (gas & swap fees).
Impermanent loss
Impermanent Loss is the loss incurred by Liquidity Providers when the token exchange price moves compared to just holding the position. If the price remains the same, the impermanent loss is 0.
Slippage
The difference between the expected price and the price at which a swap order is executed.
Market Risk Measure (MRM)
A score based on the volatility of a Token Pair
Liquidity Risk Measure (LRM)
A score based the liquidity of a Token Pair
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