Frequently Used Terms in Ola Finance
This page offers references to many of the keywords used in Ola Finance along with their corresponding definitions. This page is geared towards lenders and borrowers, and more detailed definitions can be found for most terms in the Under the Hood of a Lending Network page.
Each token that is listed in a lending network is referred to as a money market. A MM can therefore be understood as a pool of tokens that lenders provide liquidity to and borrowers take liquidity from. The name "money market" comes from the fact that these pools quote floating interest rates for borrowing and lending, reflecting the price of money.
This number, expressed as a percentage, shows how much of a MM's total value is being borrowed at that moment. For example, a money market with $500,000 ETH supplied and $250,000 ETH borrowed has a utilization rate of 50%. A utilization rate can also be seen for the entire lending network by dividing [Total Value of Assets Borrowed] by [Total Value of Assets Supplied].
This number, expressed as a percentage, is a multiplier used to calculate the max amount you can borrow against your collateral. Each token used as collateral has its own Collateral Factor. For example, if BTC has a collateral factor of 70%, then for every $100 of BTC supplied, you can borrow $70 of any available token.
Borrow Limit Used, expressed as a percentage, indicates the ratio of the amount you currently have borrowed to the total amount you are allowed to borrow. For example, if you're able to borrow a maximum of $100 (as determined by the Collateral Factor of the supplied token), borrowing $75 would equate to 75% of the Borrow Limit Used.
This number, expressed as a percentage, is used to calculate the value at which liquidation occurs and can be thought of as the ratio between the supplied value and the borrowed value at that time. Say a user deposits ETH and it has a Liquidation Factor of 80%. This means that when the value of the borrowed position reaches 80% of the value of supplied ETH, a liquidation can occur. Each token has its own liquidation factor.
The Liquidation Limit Bar, expressed as a percentage, indicates the ratio of your borrowed value to the borrowed value that would trigger liquidation. In other words, it tracks how close your borrow position is to being liquidated. When the Liquidation Limit reaches 100%, you are eligible for liquidation.
For example, let's say I supply $1000 USDC as collateral and it has a liquidation factor of 80% (so my position gets liquidated when my borrow value equals $800). If I borrow 1 ETH worth $400, my liquidation limit bar would be at 50% ($400 Borrowed/$800 Liquidation Value).
The liquidation incentive is the discount at which a liquidator receives a user's collateral when completing a liquidation. This discount incentivizes liquidators to complete liquidations, thus keeping a healthy LeN state.
The Close Factor, expressed as a percentage, refers to the amount of a position that a liquidator can close at one time when performing a liquidation. It is set at a constant 50% across all Ola LeNs, meaning a liquidator can only close out half of a given borrow position, in return for an equivalent value of your collateral (plus liquidation incentive).
The Supply APY, expressed as a percentage, reflects the amount of interest that a user would earn over the course of a year for supplying tokens. Accordingly, the Borrow APY reflects the interest the borrowers pay for borrowing tokens. Note: these rates are calculated assuming that the current rate doesn't change. A positive APY means you are earning tokens while a negative APY means you are being charged tokens.
Emissions of specific tokens to lenders and borrowers of a lending network can be provided as incentives on top of the normal Borrow/Supply APY. LeN creators indicate a token they wish to distribute, set distribution speeds, and then fill the reservoir contract with enough tokens. Once this is done, emissions would start getting distributed to lenders and borrowers according to the parameters set by the creator.
This number, expressed as a percentage, reflects the amount of interest that a user earns over the course of a year from the Rainmaker program, assuming the rate (and USD price of the Rainmaker asset) doesn't change. The Distribution APY is added to the Supply/Borrow APY to determine the Net APY that a user receives.
oTokens are "receipt tokens" that are issued to lenders after supplying assets to a lending network. These oTokens are exchanged for the underlying asset when a user goes to withdraw their supplied assets.