Weft V2: Glossary of Important Terms
Weft: A decentralized lending platform built on Radix DLT that allows users to create and manage collateralized debt positions (CDPs) using NFTs called Wefties.
Collateralized Debt Position (CDP): A loan structure where the borrower locks up collateral to secure a loan. In Weft, these are encapsulated in Wefty NFTs.
Wefty: An NFT representing a user's collateral and loan positions within the Weft platform, managing collateral and debt.
Lending Pools: Mechanism where users deposit assets to earn interest, with the pool being available to borrowers upon depositing collateral.
Deposit Units (wAssets): Interest-bearing tokens representing deposits in the Weft Lending Pools. They can be used in secondary markets or as collateral for loans.
Loan Units: Tokens representing the debt obligation when borrowing assets from the pool. Loan Units track the share of the borrowed assets and interest.
Loan-to-Value (LTV) Ratio: A percentage used to define how much can be borrowed against a specific collateral. A lower LTV generally means lower borrowing power.
Liquidation: The process that occurs when the value of collateral in a CDP falls below the threshold necessary to cover the loan, allowing the liquidation of the collateral to repay the debt.
Health Factor: An index indicating the risk of liquidation for a CDP. It compares the loan value to the collateral's liquidation threshold.
Liquidation Threshold (LT): The maximum value a loan can reach against collateral before liquidation is triggered, defined for each collateral pool.
Flash Loan: A loan that requires no upfront collateral and must be repaid within the same transaction.
Risk Index: A measure used to indicate the riskiness of a collateral. It can be loose or strict and determines whether collateral is suitable for a loan.
Efficiency Mode: A feature allowing higher LTV for single loan positions within a CDP, enabling borrowers to gain more borrowing power under certain conditions.
Isolation Mode: A mechanism that isolates risky collateral types based on their risk index and limits the use of risky assets as collateral for loans.
NFT Validator: An on-ledger component that determines the redeemable value of NFT collateral used in the Weft lending protocol.
Price Feed: An on-ledger oracle component that provides real-time asset prices for determining the borrowing power of collateral and the health of CDPs.