Strategy 0 : Glossary
DeFi General
Token Approval: Every token requires one-time token approval prior to the first use on the protocol. The purpose is to give protocol access to the user's wallet to validate the wallet balance and transfer tokens that user's want to make transaction of. In the process of token approval, small amount of KLAY is needed as a gas fee.
Token Swap: Token Swap refers to a transaction in which token is exchanged for a different token. With the swap service, users may exchange the tokens in one's wallet for the token they need.
APR / APY:
APR: APR stands for Annual Percentage Rate and it refers to the interest the user will receive for providing asset
APY: APY stands for Annual Percentage Yield and it refers to the compounding interest the user will receive for providing assets. Compounding means the interest earned is reinvested and contributed to the next calculated interest rate.
Price Impact: Price impact occurs when the ratio of assets is shifted due to a large-size asset swap. As a result, the user experiences loss, receiving less assets than expected with the discrepancy between the current market price and the price the user actually pays. When doing leverage yield farming on KLEVA protocol two types of token need to be deposited at same value ratio of 50:50. If not, token swap occurs to make them equal in value. KLEVA protocol uses token with higher value to swap to the lower one. In this process there may be price impact.
Slippage: Slippage refers to the difference between the expected token price and the actual executed price. The difference comes from the shift in token exchange ratio just before the transaction is submitted. This might affect the number of tokens actually acquired by the user.
To prevent loss coming from slippage, the user may set slippage allowance percentage. For instance with the slippage allowance of 0.5%, if the actual number of token received varies more than 0.5% to the expected number, the transaction will be reverted.
Protocol: Protocol is a set of rules that allows the transfer of data and communication between two or more computers. So on blockchain protocol cryptocurrencies maybe transferred and exchanged securely.
Decentralized Exchange: DEX stands for Decentralized Exchange where peer-to-peer cryptocurrency trading occurs without intermediary thanks to smart contract. Originally, in centralized exchanges (CEX) transaction was done between individual and server-- which acts as an intermediary. Unlike CEX, in DEXs transaction is proceeded automatically without an intermediary when each individual's conditions are met.
Governance Token: Governance token is minted to incentivize users to actively participate for the protocols' future growth making the protocol self-sustainable. By using the governance token, the user may make a proposal for the protocol's future and exercise the vote. In the case of KLEVA protocol, there is a governance token named KLEVA.
Buyback & Burn: Buyback & Burn is a policy KLEVA protocol has to maintain the value of KLEVA token. Buyback is where KLEVA protocol buys some KLEVA token circulating in the market with the fee the protocol has collected. Then KLEVA protocol burns the KLEVA token in order to decrease the number of KLEVA tokens circulating in the market. Total amount of KLEVA token burned can be seen in DOCs Tokenomics > Proof-of-Burn(PoB)
Lend ∙ Stake
Lend: Lend is a main service of the KLEVA protocol where users may earn interest by depositing tokens. Deposited tokens are utilized by the farmers. Farmers can open a bigger position with borrowed tokens. They will have to pay borrowing interest but will be able to earn higher APY. The borrowing interest farmers pay becomes interest for the token deposited.
Stake: Staking is a process of locking up tokens the user is holding to the protocol and earn reward. In KLEVA protocol users can stake ib tokens that they received for the depositing token to KLEVA protocol and earn KLEVA token.
Utilization Ratio(UR)Utilization Ratio (UR) indicates how much the deposited tokens are used in lending farmers. Increase in lending will lead to higher UR and higher borrowing interest, resulting in higher deposit profit.Borrowing interest is affected by UR. More information about this can be found in Docs > Triple Slope Model.
ibToken: ibToken stands for interest-bearing token that accumulates interest by just holding it.
When user deposit token to KLEVA protocol, they are given ibToken as proof of deposit. The amount the user receives depends on the conversion ratio. For example, with the conversion ratio of 1 ibWEMIX = 1 WEMIX, the user will receive 100 ibWEMIX for depositing 100 WEMIX. The token deposited is lent to farmers
Farms in return pay borrowing interest, which is used to increase the ibToken conversion ratio. So carrying on with the example, the conversion ratio will rise to 1 ibWEMIX - 1.001WEMIX, increasing the value of ibToken.
As a result when user decides to make a withdrawal, depositors will be given more token then they first deposited. *In the event of bad debt occurrences, the exchange rate may decrease. In addition those who staked ib tokens will be able to earn KLEVA token reward.
Farm
Farm: Farm is a service where users are distributed transaction fee as a reward for depositing a pair of tokens in a DEX. The source of the reward is the governance token of the DEX. KLEVA protocol rewards farmers with additional KLEVA token for taking part in leverage yield farming.
Leverage: Leverage yield farming is a function to use when a user wants to open a position bigger than their current balance. Users can increase total assets in position and seek higher APY by borrowing token through leverage.
Borrowing Interest: Borrowing Interest is interest farmers pay to lenders for borrowing the token.
Position Value:
Position value explains the status of the farm position. Current USD value and the amount of tokens in the position are displayed.
Position value = equity value + debt value
Equity Value: Equity value is the asset that was originally owned by the user prior to doing leverage yield farming. Thus user may be able to find the amount of token the user put to the position and the interest profit it has produced so far.
Debt Value: Debt value refers to the amount of asset user has borrowed and the amount of borrowing interest generated.
Debt Ratio:
Debt ratio is a ratio of debt value to position value. If Debt Ratio gets too high, the borrowed asset is thought to be at risk. Thus to protect the asset the position may get automatically closed and be liquidated.
Debt ratio = Debt Value / Total Asset
Adjust: Adjust is a feature to increase position value whilst the leveraged yield farming position is opened. Position Value can be increased through adding collateral or borrowing more. To make the position sustainable, the user has to consider the Debt Ratio. If the Debt Ratio is rather high, the user should add collateral to lower the Debt Ratio and further prevent the position from getting liquidated. In opposite cases, with a considerably low Debt Ratio, users could borrow more to increase the position value and seek higher profit.
Liquidation: Liquidation is having a farming position automatically closed, withdrawing all assets when the condition is met. The condition is when the user's leveraged yield farming position's debt ratio meets the liquidation threshold. In such a condition, the user's borrowed asset is believed to be at risk and the user may not be able to repay the debt.
Entirely Close: Entirely Close is withdrawing all the assets the user put in a leveraged yield farming position. With entirely close user will return the borrowed asset, pay the borrowing interest, and take what's left. In the process of returning the borrowed asset, there may be token swap taking place causing loss coming from price impact.
Partially Close: Partially Close is a partially withdrawing asset in leveraged yield farming position. Users may choose which asset to withdraw and how much of the borrowed asset to use in debt repayment. With partial close, the user may be able to reduce the size of the token swap taking place, reducing the loss coming from price impact.
Withdrawal Method: When withdrawing, users may choose between 'Minimize Swap' or 'Convert to Debt Token'.
Minimize Swap: If users choose to 'Minimize Swap' then only the amount of token necessary in repaying debt is swapped. Thus swap size is minimized and so is the loss coming from price impact.
Convert to Debt Token: If users choose to 'Convert all to Debt Token' all token are withdrawn in debt token type. Users will take what's left over after repaying debt.
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