πŸ“–Glossary

APR (Annual Percentage Rate)

The yearly percentage returns generated from an invested principal amount (i.e. interest rate), not taking into account compounding.


APY (Annual Percentage Yield)

The yearly percentage returns generated from an invested principle amount (i.e. interest rate), taking into account compounding.


Approve

An ERC20 token function that, once executed by the network, enables another address to spend the specified amount of tokens from a user’s address (i.e. EOA).


AMM (Automated Market Maker)

AMMs maintain a liquidity pool of assets against which trades can be made automatically along a pricing curve in exchange for a fee.


Boost

Additional token rewards which are distributed to vault depositors to incentivize deeper liquidity for the vault. Factor Boost allows anyone to allocate any ERC20 token as additional rewards for depositors in a target strategy vault.


Borrow

The act of obtaining a loan whereby a user is provided capital upfront with the obligation to return the initial capital plus whatever accrued interest to the lender in the future.


Collateral

An asset which is pledged/committed as a security to enable the issuance of another asset (e.g. tokens, loans, etc.).


Collateralisation Ratio

The ratio between the value of the collateralized assets versus the the debt (i.e. borrow amount) issued.


Concentrated Liquidity

An AMM concept whereby capital is allocated to narrower price ranges thereby increasing market making capital efficiency.


DAO (Decentralized Autonomous Organization)

Collectively-owned, blockchain-governed organisations working towards a shared mission.


Debt

An asset which is owed by means of the user taking out a loan (i.e. borrow position).


DEX (Decentralized Exchange)

A decentralized trading platform that enables peer-to-peer trading of tokens without the custodial requirements of a middleman.


ERC20

A technical standard for fungible tokens that enable safe handling of interchangeable tokens with predictable behaviours.


ERC721

A technical standard for non-fungible tokens that enable safe handling of unique tokens with predictable behaviours.


Fair Launch

A token initial distribution method whereby all participants get the same priority (no premines or founder allocations) to the newly minted tokens based on resource contributions to the protocol.


Farming

The provision of liquidity to a protocol in exchange for additional rewards that are indirectly distributed by the protocol as incentives.


Fee Tier

The fee tier specifies a percentage fee for every swap that takes place against an AMM liquidity pool. This trading fee compensates liquidity providers for contributing liquidity to the market.


Flash Loan

Uncollateralised lending of crypto assets that enables profit making strategies via stacking multiple strategies into a single Ethereum transaction.


Gas Fee

A transaction fee that is paid to the network to incentivize processing of the submitted transaction.


Gauge

The gauge measures how much a particular address is contributing towards a pool's liquidity and is usually weighted based on specific protocol goals.


Health Factor

Used in the context of lending, the Health factor is a score which represents the safety of the collateralized assets against liquidations due to changes in asset to debt valuations. The lower the Health Factor, the higher the likelihood of liquidation with a Health Factor of 1 indicating that the liquidation threshold value is equal to the debt value borrowed.


Leverage

In the financial context, leverage refers to the usage of borrowed capital for funding. That is, collateralizing your current capital in order to "lever up" your spending power through borrowed funds.


Liquidation

Usually used in the context of leveraged positions, liquidations refer to the forced closure of a borrow position when it becomes undercollateralized.


Liquidity Mining

Also referred to as yield farming, liquidity mining is the process of providing liquidity to specific protocol pools for the purposes of receiving additional rewards that are external to the market making fees


Liquidity Pool

A smart contract that maintains a pool of assets against which trades can be made automatically along a pricing curve in exchange for a trading fee.


Liquidity Position

Usually used in the context of concentrated liquidity pools, a liquidity position is a NFT which represents a liquidity provider's unique liquidity contributions to a pool.


Liquidity Position Range

Used in the context of concentrated liquidity, each position will specify a price range within which the underlying liquidity is used to facilitate trades and earn fees.


Liquidity Provider

A user who provides liquidity, in the form of tokens, to a liquidity pool in exchange for a fee for trades utilizing their liquidity.


LP Token

Liquidity Pool Tokens represent a share of the pool's underlying liquidity and are provided to Liquidity Providers in exchange for their contributed liquidity.


LTV (Loan To Value)

The ratio between the value of the loan versus the value of the underlying collateral. Higher LTV implies higher risks due to decreased likelihood of repayments.


Managed On Factor

The total value of all DeFi positions that is being actively facilitated by Factor.


Margin

In DeFi, margin refers to the collateral which a user pledges in exchange for borrowing additional liquidity to facilitate trades above the collateral value.


Margin Call

A margin call occurs when the value of collateralized assets underlying a loan is insufficient and the borrower is "called" to add more collateral or close the position (maybe forecfully).


Position

A position describes a user's stake in a DeFi strategy which includes the user-defined parameters that enables a user to execute generalized DeFi strategies as well as the value of assets contributed.


Price Impact

The resulting change in the market price that is brought about due to the execution of a swap transaction.


Repay

Specific to loans, it is the process of paying back the owed debt of a loan in order to reduce the amount borrowed.


Scale

Refers to Factor Scale which a a gauge voting mechanisms that enables veFCTR holders to vote on the distribution of weekly gauge rewards to different community curated vaults created on Factor.


Slippage

The difference between the expected and final price of a trade.


Swap

In the context of DeFi, a swap is a peer-to-peer exchange of digital assets that is facilitated by permissionless smart contracts.


Switching

Used in the context of a leveraged position, switching enables users to change the asset that is being collateralized or the asset that is borrowed.


Threshold

Used in the context of a leveraged position, the liquidation threshold is the ratio between a leveraged position's debt to collateral at which the borrowing position becomes undercollateralized (i.e. at risk of being liquidated).


Token

A general term which in the DeFi context refers to the representation of digital assets (i.e. definitions and interfaces) on a blockchain.


TVL (Total Value Locked)

A measure of the total value of all tokens which are locked within a protocol's smart contracts.


Vault

Used to refer to a smart contract which holds assets on behalf of the user in order to automate yield generating strategies.


Wallet

Software that securely holds the private key that enables users to conveniently interact with the blockchain and control their assets on the network.


Zap

In DeFi, zaps refer to a convenience feature which enables users to interact with multi-token strategies by using a single token.

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