Glossary
Some terms used throughout the documentation may be unfamiliar to developers. Below we list some common terms that will help with your understanding.
If you need development support, join the #developers channel on our Aave community Discord server.
Term
Description
APY
Annual Percentage Yield, which is the yield/interest after a year, which includes compounding interest. Note that this is different from Annual Percentage Rate (APR), which does not take into account compounding effects.
Liquidity Index
The Interest cumulated by the reserve during the time interval since the last updated timestamp
Loan To Value
The maximum borrowing power of a specific collateral. If a collateral has a Loan to Value of 75%, for every 1 ETH worth of collateral the user will be able to borrow 0.75 ETH worth of principal currency. The Loan To Value is specified per collateral and expressed in percentage points.
Liquidation Threshold
The threshold of a borrow position that will be considered undercollateralized and subject to liquidation. If a collateral has a liquidation threshold of 80%, it means that the loan will be liquidated when the debt value is worth 80% of the collateral value. The liquidation threshold is specified per collateral and expressed in percentage points.
Liquidation Bonus
The bonus received by liquidators to incentivise the purchase of specific collateral that has a health factor below 1. The Liquidation Bonus is specified per collateral and expressed in percentage points.
Health factor
Represents the ratio between total collateral multiplied by the liquidation threshold, and the borrowed principal. When the Health Factor goes below 1, the loan is undercollateralized and can be liquidated. Also see liquidationCall().
Stable rate
A loan with a stable rate behaves like a fixed rate loan in the short term, but the rates can be rebalanced following sudden market changes in the medium/long term.
Ray units
For internal calculations and to reduce the impact of rounding errors, the protocol uses the concept of Ray Math. A Ray is a unit with 27 decimals of precision. All the rates (liquidity/borrow/utilisation rates) as well as the cumulative indexes and the aTokens exchange rates are expressed in Ray.
Please refer to the following article for further details about this concept.
Reserve
The address of the underlying asset.
Last modified 5mo ago
Copy link