Also known as Flip. The winning bidder pays Dai for collateral from a liquidatedVault. The Dai received is used to cover the outstanding debt in the liquidated Vault
The percentage of your collateral’s value that you are permitted to borrow. This may be expressed as “0.7”. This collateralization factor would signify that for each $100 of collateral, you can borrow up to $70 of an asset.
Also known as DEX. A DEX is an exchange where users trade cryptoassets with one another, all on-chain. This means that users retain control over their assets, rather than entrusting them to the exchange.
A DSA is a smart contract that acts as an intermediary between your assets and the blockchain. Allows you to sign a single transaction made up of multiple actions to be executed in a predetermined order. Provides functionality while you retain custody.
A loan that can be borrowed for free/near-free rates as long as it is paid back within the same transaction it is borrowed. Ex: Borrow $100 of tokenX, trade for 10 of tokenY on exchangeA, sell 10 tokenY on exchangeB for a higher price, pay back loan and keep profit.
To borrow an asset, it’s typical to put up collateral. If the value of your collateral falls below a threshold, your position may be forcibly sold (liquidated) to cover your position. Ex: A bankrupt company sells desks, computers, chairs, etc to pay back their debts
The ability to buy/sell/lend/borrow an asset without drastically affecting price. Ex: It is easy to buy and sell many shares of Apple (high liquidity), but shares in a penny stock are not easily sold or traded without heavily affecting the price (low liquidity).
Within lending protocols, users have access to a pool of assets to borrow from, or to lend into. Pools may be made up of single assets, asset pairs, or a combination of multiple assets. These assets are controlled by a smart contract.
Users who lend assets into a liquidity pool. They are incentivized to lend their assets generally through a combination of platform tokens, variable interest rates, and trading fees.
Taking the position that an asset will increase in value
When buying or selling assets on a market, each bid/ask price will have a certain depth of liquidity. Beyond that, the price per unit changes. This change is known as slippage, as your value is “slipping” due to lower liquidity.