Key Terms From This Episode
Capital Efficiency:
How effectively you can use your capital to generate returns. Lower collateral ratios are more capital efficient but riskier, while higher ratios are safer but less efficient.
DIF (Debt In Front):
The cumulative total value of USDL debt from all Vaults that have a lower collateral ratio than your specific Vault. DIF helps you understand your redemption risk, since the lowest collateralized Vaults are redeemed against first.
ICR (Individual Collateral Ratio):
Your personal Vault's collateral ratio – the ratio of your ETH collateral's dollar value to your USDL debt's dollar value.
Liquidation:
The process of force-closing an undercollateralized Vault. When a Vault's collateral ratio falls below the minimum threshold, anyone can liquidate it.
Recovery Mode:
A protective state that activates when the Total Collateral Ratio falls below 150%. In Recovery Mode, any Vault with a collateral ratio below 150% can be liquidated to quickly restore the system's health.
Repayment:
The act of sending USDL back to your Vault to reduce your debt and increase your collateral ratio. Unlike redemptions, repayments have no fee.
The LL Librarian
Your Genius Liquid Loans Knowledge Assistant