Terms used throughout the documentation may be unfamiliar to developers. Below we list some common terms that will help with your understanding.
Adequacy Ratio
Represents the ratio between total collateral multiplied by the LTV, and the borrowed principal multiplied 1/Borrow_Factor**. When the Adequacy Ratio goes below 1, the loan is undercollateralized and can be liquidated.
Exchange Rate
Each iToken is convertible into an ever increasing quantity of the underlying asset, as interest accrues in the market. The exchange rate represents the real-time exchanging ratio between iToken and the underlying asset.
Loan To Value
The maximum borrowing power of a specific collateral specified per collateral and expressed in percentage points.
Borrow Factor
The discount on LTV when borrowing asset, specified per borrowing asset and expressed in percentage points.
Close Factor
The maximum percentage of outstanding borrow of the underwater borrows when a liquidation occurs.
Liquidation Incentive
When a liquidation occurs, a liquidator may repay some or all of an outstanding borrow on behalf of a borrower and in return receive a discounted amount of collateral held by the borrower; this discount is defined as the liquidation incentive.
Supply Capacity
The maximum supplying amount of collateral. If the capacity meets, no more supply is permitted.
Borrow Capacity
The maximum borrowing amount of borrow asset. If the capacity meets, no more borrows are permitted.
Distribution Speed
The total amount of reward token distributes in one block.
Distribution Factor
The distribution factor defines the weighted factor of reward speed for each asset.
Reserve Factor
The reserve factor defines the portion of borrower interest that is converted into protocol profits.
**Adequacy Ratio is calculated as followed,