# Glossary

Terms used throughout the documentation may be unfamiliar to developers. Below we list some common terms that will help with your understanding.

**Adequacy Ratio is calculated as followed,

Last updated

Terms used throughout the documentation may be unfamiliar to developers. Below we list some common terms that will help with your understanding.

**Adequacy Ratio is calculated as followed,

Last updated

Term

Description

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.