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DeFi terms, explained

Short, plain answers with a worked example from our calculators, and a video for the big ones.

Borrowing

Health factorHow far your loan is from being liquidated. Below 1.00, it can be.Loan to value (LTV)What you owe as a share of what you supplied.Liquidation thresholdThe LTV at which your position can be liquidated.Liquidation penaltyThe extra slice of collateral a liquidator takes as a reward.

Strategies

LoopingBorrowing against a staked token to buy more of it, for a bigger yield and much bigger risk.LeverageHow many times your own money you have exposure to.

Yields

APY vs APRAPR is the simple yearly rate. APY includes compounding.Staking yieldWhat a liquid staking token earns from the network's staking rewards.PT and YT (Pendle)Pendle splits a yield token into a fixed-rate part (PT) and a variable part (YT).

Risk

DepegWhen a token that should track another drifts away from it.Impermanent lossWhat a liquidity pool costs you versus just holding, when prices move apart.Risk allowanceDefiLab's yearly cost for the chance a protocol gets exploited.

Examples use sample numbers. Estimates, not advice.