Glossary

The documentation includes specific terminology. We've compiled a list of common terms used throughout our materials. This glossary is designed to enhance your understanding of the key concepts discussed.

APY	APY is the rate of interest earned on an investment over a year, taking into account the effect of compounding interest. This differs from Annual Percentage Rate (APR), which does not include the effects of interest earned on interest.
Liquidity Index	This index tracks the interest that accumulates over time in a reserve since the last update. It's essential for calculating the ongoing yield from investments in that reserve.
Loan To Value	LTV indicates the maximum loan amount as a percentage of the collateral's value. For example, an LTV of 75% means you can borrow up to 750 XFI for every 1000 XFI of collateral provided.
Liquidation Threshold	This is the point at which a loan becomes at risk for liquidation, occurring when the debt exceeds a set percentage of the collateral’s value, usually around 80%. This threshold is crucial for managing risk and varies by collateral type.
Liquidation Bonus	This is an extra reward given to those who help liquidate loans that are close to default, specifically when the loan’s health factor drops below 1. The bonus amount varies depending on the collateral involved and incentivizes the mitigation of high-risk loans.
Health factor	The Health Factor measures the safety of a loan by comparing the total value of the collateral (adjusted for liquidation thresholds) to the outstanding debt. A Health Factor below 1 suggests a high risk of liquidation if the debt isn’t managed.
Reserve	In PhoLend, a Reserve is an asset or currency pool that users can lend or borrow from. Each reserve has its specific set of rules and conditions, including interest rates and liquidation policies, which reflect the unique characteristics of the asset or currency.