Glossary

Automated Market Maker: Smart contract with a price-adjustment model in which an asset’s spot price deterministically responds to market forces and market participants on either side of the market trade with the AMM rather than with each other.Borrow rate: The interest rate paid over time by borrowers (e.g. 2%.) Each collateral has its own borrow rate.

Borrow fee: The amount of fees accrued in a vault. Calculated based on the cumulative borrow rate and the amount and length of the loan.

Cumulative rate: The time-adjusted cumulative borrow rate for a collateral. Accounts for rate changes.

ERC20: A technical standard used for smart contracts on the Ethereum blockchain for implementing tokens.

Health factor: A number that represents the collateralization level of a vault. Vaults with a health factor less than 1 is open for liquidation.

Liquidation fee: Fee charged to the borrower for getting his collateral liquidated.

Liquidation Ratio (LR): Ratio used to calculate for liquidations. For example, an LR of 130% means Vaults with an MCR below 130% can be liquidated.

Minimum Collateralization Ratio (MCR): The Vault must be collateralized with more than the MCR for borrowing. For example, an MCR of 150% means borrowers need 150% collateral deposited before they can borrow.

Origination fee: Fee applied when borrowing/opening a loan.

Vault base debt: A number unique to each vault that partially represents a vault’s debt.

Vault total debt: The amount that borrowers will have to fully repay before the vault’s collateral can be fully withdrawn.

Stablecoins: Cryptocurrencies designed to minimize the effects of price volatility. They seek to function as a store of value and a unit of account.