To help our readers understand the terminology used in these documents we have put together a glossary table below.
Automated market makers (AMMs) allow digital assets to be traded in a permissionless and automatic way by using liquidity pools rather than a traditional market of buyers and sellers
Base Token
The token that underlies the Yield Bearing Token (e.g. for cDAI the base token is DAI)
Capital Token (*FKA Principals)
The token that can be redeemed for a unit of the yield-bearing token at maturity
Fixed Yield
The return that Capital token holder earns by holding the token until maturity
Impermanent Loss
The difference between the return achieved by a liquidity provider and the return achievable by holding the two assets outside the pool
Liquidity Pool
A reserve composed of two assets provided in different proportion but with the same dollar value
The date at which the pool expires and Capital and Yield token holders can redeem their tokens in exchange for a certain quantity of Yield Bearing Tokens
The act of burning Capital and Yield tokens in exchange for a certain quantity of Yield Bearing Tokens
Swap Fees
A percentage of the token swapped that represents the remuneration earned by liquidity providers
Variable Yield
The yield accrued on the Yield Bearing Token which fluctuates over time
Yield Bearing Token
The token on top of which a variable yield accrues over time (i.e. cDAI)
Yield Token
The token on top of which the Yield Bearing Token variable yield accrues over time
Zero Coupon Bond
A debt instrument that does not pay interest, but trades at a discount to the maturity value. At maturity, the zero-coupon bond will be redeemed for its face value, providing a fixed yield to its holder
*FKA = Formerly Known As
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