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Automated Market Maker, the algorithmic price discovery mechanism that allows users to interact with smart contracts and enable liquidity pools.
Users while interacting with Timeswap AMM can automatically derive interest rates & collateral values to be locked without depending on any external price feed
APR or Annual Percentage Rate
It is the expected yearly interest to be paid by a borrower or the expected yearly yield received by the lender.
Arbitrage is the simultaneous purchase and sale of the same asset in different markets in order to profit from tiny differences in the asset's listed price.
An arbitrageur is a type of investor who attempts to profit from market inefficiencies. Arbitrageurs exploit price inefficiencies by making simultaneous trades that offset each other to capture risk-free profits.
Bear and bull market
A bull market is when market conditions are favorable, while a bear market is just the opposite.
The Black-Scholes model is a mathematical equation used for pricing options contracts and other derivatives, using time and other variables.
A Collateralized Debt Position is a loan position created by a borrower by locking collateral to borrow another asset
Collateral is essentially the security backing a transaction. Like in traditional loans such as a mortgage, which has the property assigned as collateral that can be sold off to cover a default, DeFi also backs any lending/borrowing by the use of various crypto assets.
The Collateral Factor represents how much a user can borrow against the collateral supplied to the protocol, in percent terms. For example, if a pool has a collateral factor of 50%, then for $10 supplied, $10 * 50% = $5 of value can be borrowed against.
It denotes the value of assets pledged to secure a loan. This parameter is used by the lenders to measure the risk of lending
Decentralized Finance or DeFi is the blockchain-based financial system that has emerged in the wake of smart contract-enabled blockchain. DeFi revolves around DApps or Decentralised applications that perform financial functions. There are no central financial intermediaries between market participants or superior authority governing the markets but instead mediated by smart contract programs.
DEXs are decentralized crypto exchanges that offer access to digital assets without an intermediary.
Divergent / Impermanent Loss
It is the temporary loss to a liquidity provider due to the price divergence in the pair of the liquidity pool
ERC-1155 is a token standard that enables the efficient transfer of fungible and non-fungible tokens in a single transaction.
The token standard on Ethereum allows new tokens to be minted to be used in various apps. Introduced by the 20th Ethereum Request for Comment (ERC).
Leverage refers to using borrowed capital to make trades. Leverage trading can amplify your buying or selling power, allowing you to trade larger amounts. So even if your initial capital is small, you can use it as collateral to make leveraged trades.
Liquidation in DeFi is selling collateral of borrowers at a discount when the collateral value goes below a minimum value. Liquidators can pay the debt and claim the collateral.
Liquidity is a collection of assets locked into a fund, called a pool, through the use of a smart contract. Liquidity pools enable DeFi projects to offer a decentralized exchange, lending, borrowing, and other functions.
Its the process of adding liquidity to the liquidity pools on protocols and in return being rewarded with native tokens on top of regular yield
LP (Liquidity Providers)
LP or Liquidity Providers are the people who initiate a liquidity pool for a set of crypto assets. These liquidity pools have funds locked in the smart contract for the set of tokens that are part of the pool. This enables the algorithmic market creation for the exchange of these tokens directly via the liquidity in the pool instead of having to rely on buyers and sellers
An option contract is a financial agreement that entitles you to buy or sell an asset at a pre-determined price.
Oracles are third-party services that provide real-time data & any external data to smart contracts which are outside of their ecosystem. Currently, DeFi protocols rely on oracles for real-time on-chain data like the price of assets.
Over-collateralization (OC) is the provision of collateral that is worth more than enough to cover potential losses in cases of default. It is used to effectively manage risk and involves placing an asset as collateral on a loan where the value of the asset exceeds the value of the loan.
A liquidity pool is a digital pile of cryptocurrency locked in a smart contract. This results in creating liquidity for faster transactions.
When the expected price of a trade and the price at which a trade is actually executed is different, this can be referred to as slippage. This typically occurs during times of high volatility or when the liquidity pool is too shallow to maintain a constant bid/ask spread.
It is the present market exchange price of the collateral with the asset
Transition/ Strike price
The price at which a borrower decides whether or not he wants to exercise his right to sell the locked collateral to the lenders is what we are calling the transition price, which in the context of the options is simply the strike price.
Yield refers to earnings generated over a period of time.