Glossary

Term	Description
aTokens	Interest-bearing tokens received by users when they supply assets to Udon Finance. These tokens represent the user’s share of the liquidity pool and accrue interest in real-time.
APY	Annual Percentage Yield, which is the yield or interest earned after a year, including compounding interest. This differs from APR, which does not account for compounding effects.
Borrow Cap	A limit set by the Udon protocol on the maximum amount of an asset that can be borrowed from the protocol. This helps manage exposure and risk associated with each asset within the pool.
Collateral	An asset supplied to Udon Finance to secure a borrowing position. The collateral must exceed the value of the borrowed amount to ensure the protocol's solvency and stability.
Health Factor	A ratio that determines the safety and stability of a user's loan position. It compares the value of the user's collateral to their borrowed assets. A Health Factor below 1 indicates that the position is at risk of liquidation.
Liquidation	The automatic process that occurs when a borrower’s Health Factor drops below 1. This results in a portion of the collateral being sold to repay part of the debt and bring the position back to a safer level, protecting the protocol's overall health.
Liquidation Bonus	The bonus provided to liquidators as an incentive to purchase undercollateralized assets during a liquidation event. It is expressed in percentage points.
Liquidation Threshold	The specific point at which a loan becomes eligible for liquidation due to insufficient collateral relative to borrowed funds. This threshold is defined per asset and determines the minimum collateral value required to maintain a position.
Liquidity Index	Tracks the cumulative interest earned by a reserve over time, used to calculate accurate interest payments for suppliers.
Loan To Value (LTV)	The maximum percentage of a collateral asset's value that can be borrowed. For example, an LTV of 75% means that for every $100 of collateral, up to $75 can be borrowed.
Oracle	A service used by Udon Finance to fetch external data, such as the real-time prices of assets. This data is critical for accurately determining the value of collateral and debt, ensuring fair and secure operations.
Reserve Factor	A percentage of interest accrued by borrowers that is allocated to the Udon protocol's reserve. This mechanism helps to safeguard and sustain the protocol's long-term health.
Supply Cap	A limit set on the total amount of a particular asset that can be supplied to the Udon Finance protocol. This helps manage overall liquidity and mitigate risks associated with overexposure to a single asset.
Utilization Rate	A metric that determines the proportion of borrowed assets to the total available assets in a reserve. A higher utilization rate indicates higher borrowing demand for that specific asset.