Yeti's Protocol Terminology
Trove - A user may deposit a basket of assets and open a trove. It is used as backing to mint and withdraw YUSD. Each address may have only one trove and can actively manage it by borrowing more YUSD or repaying its YUSD debt.
Debt - The amount of YUSD you have minted against the collateral in your Trove.
Deposit fee - This is a one-time fee when collateral is deposited into Yeti. The fee amount varies depending on which collateral and its backing percentage. As backing percentage increases and if the collateral is higher risk, the deposit fee is higher.
Redemption Fee - There is a one-time fee paid on redemptions. This fee is a minimum of 0.5%, with 0.1% going to the trove being redeemed against.
Safety Ratio - Used as a weighting mechanism to give lower risk (less volatile, more liquid) collateral a higher weight in the system compared to higher risk collateral. A high safety ratio means more debt can be issued against the same dollar amount of the asset. More detail is available above in the Risk-Adjusted Value definition below.
Risk-Adjusted Value - RAV value is a way for the system to weight collateral risk. For some dollar value of collateral, safer collateral has a RAV relative to risky collateral. The risk-adjusted value depends on the collateral's safety ratio. Safety ratios must be between 0 and 1.1. Stable collateral (i.e. qiUSDC, aUSDC, av3CRV) can have a safety ratio between 1 and 1.1, but all other collateral has a safety ratio between 0 and 1.
Risk-Adjusted Value = Safety ratio * Token amount * Token Price in USD
- For example, I have 1000 JOE at a price of $2.75 with a safety ratio of 0.8.
- Risk-Adjusted Value = 0.8 * 1000 * 2.75 = 2200 RAV
Individual Collateral Ratio - Ratio of the Risk-Adjusted Value of a borrower's trove collateral compared to their debt. Troves are eligible for liquidation if their individual collateral ratio drops below 110%.
Individual Collateral Ratio = RAV of Trove's Collateral / Debt in Trove
- For example, I have 1000 JOE at a price of $2.75 with a safety ratio of 0.8. This has a RAV of 2200. I have taken out 2000 YUSD in debt.
- Individual Collateral Ratio = 2200 RAV / 2000 YUSD = 110%
Total Collateral Ratio - The collateral ratio (TCR) of the entire protocol. When TCR is below 150% the system enters recovery mode. In recovery mode, Total Collateral Ratio (TCR) also weights safe collateral higher than high-risk collateral, similar to the way RAV works. The only difference is that stablecoins have a higher weighting in the TCR calculation than in the RAV calculation.
TCR = Sum Over Collaterals(Collateral's System Ratio * Collateral's Dollar Value) / Total YUSD Debt
Backing percent - How much of the protocol is backed by that particular asset. If the system has RAV of $1,000,000 and it has $10,000 RAV of JOE, then it has 1% backing percent of JOE.
Recovery Mode - The system goes into recovery mode when the Total Collateral Ratio of the system is under 150%. The system blocks borrower transactions that would further decrease the TCR. This means that borrowers may not withdraw collateral or borrow YUSD during recovery mode.
Stablecoin - Stablecoins are cryptocurrencies that are designed to be stable in price. Often times their market values will be pegged to some external reference such as the US dollar.
Peg - When something is pegged, it means that it is fixed to an amount at a particular level. For example, YUSD is pegged to 1 USD and should remain fixed to the price of 1 USD.
Annual percentage rate (APR) - APR is expressed as a percentage that represents the monetary value or reward that investors are expected to earn. This includes any fees or additional cots associated, but does not take compounding into account.
Staking - Staking is the process of locking up tokens in exchange for rewards or interest. By staking your assets, you support the blockchain network and help confirm transactions.
Arbitrage - Arbitrage is the process of purchasing and selling the same asset in different markets in order to profit from the difference in the listed prices. By profiting through exploiting market inefficiencies, it inadvertently resolves the price in different markets.
High-risk collateral - High-risk collateral refers to assets with high price volatility. These collateral types will have a lower safety ratio assigned to them because liquidation risk are higher due to fluctuations in price.