Reference
Glossary
Definitions are scoped to the protocols in this publication. A term that means one thing in Aave can be a different object in Maker or Curve.
A
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Amplification coefficient
The parameter A in Curve StableSwap. Larger values pull the pricing curve closer to a constant sum while balances remain near the peg, which reduces slippage for similarly priced assets and makes the price fall faster once balances diverge.
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aToken
The interest-bearing claim minted by an Aave V3 market when a user supplies an asset. The token is pegged one-for-one to the underlying asset in the protocol’s accounting, and the balance grows as the reserve’s liquidity index grows.
B
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Bad debt
Debt that remains after the collateral securing it has been exhausted. In a lending pool it is a loss shared through the reserve; in Aave V4 the overview calls the comparable shortfall a deficit that spokes can eliminate from supplied shares.
C
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Close factor
The fraction of a borrower’s debt that a single liquidation may repay. Aave’s V4 overview describes V3’s default close factor as 50 percent, with a 100 percent close factor in specified unhealthy or small-position cases. V4 replaces that default with a target health factor.
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Collateral factor
A risk parameter that limits how much of an asset’s value counts toward borrowing power. Aave V4 stores collateralization parameters, including the collateral factor, in dynamic configuration keys so a change can apply to new positions without rewriting every open position.
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Concentrated liquidity
Liquidity that is active only between two prices. Uniswap v3 introduced it, and v4 keeps the same pricing idea: a position earns fees only while the pool price is inside its range, and outside that range the position holds only one of the two assets.
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Constant product
The invariant x · y = k used by Uniswap v2. A swap changes the two reserves but may not decrease the product after the fee. The marginal price is the ratio of the reserves, so larger trades move the price more.
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CryptoSwap
Curve’s invariant for assets that are not expected to hold a peg. It keeps liquidity concentrated around an internal price scale and changes shape away from that scale through the amplification coefficient and gamma. It is a different pool family from StableSwap.
D
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DAI
The stablecoin accounted for by Maker’s Vat. Vault debt is denominated in DAI, and the Sky documentation describes a converter that exchanges DAI and USDS one-for-one in both directions with no fee.
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Dutch auction
A sale that starts at a high price and falls until a buyer accepts it. Aave V4 uses the phrase for a liquidation bonus that increases as health factor falls. Maker’s collateral auctions are a separate implementation in the dss liquidation contracts.
E
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Efficiency mode
An Aave V3 category for correlated assets, often called eMode. Positions that opt into a category can use the category’s collateral parameters instead of the looser parameters that must work for every asset in the market.
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ERC-4626
A tokenized-vault interface with deposit, mint, withdraw, redeem, and share-to-asset conversion. Sky’s sUSDS contract implements it for the Sky Savings Rate. Curve Stableswap-NG can also treat an ERC-4626 token as an asset type whose rate comes from convertToAssets.
F
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Flash accounting
Uniswap v4’s practice of recording token deltas during a PoolManager unlock and transferring tokens only at settlement. A multi-hop swap can therefore avoid moving the intermediate token between pools.
H
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Health factor
Aave’s scalar for whether a borrower’s collateral still covers their debt after risk parameters. The V4 documentation sets the liquidation threshold of this factor at 1. Below that, a liquidation call is eligible.
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Hook
An optional contract attached to a Uniswap v4 pool. The hook address is part of the pool key and is fixed when the pool is initialized. It can run before or after initialize, liquidity changes, swaps, and donations, and only if the pool’s permission flags allow that callback.
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Hub
The immutable liquidity coordinator in Aave V4. It tracks supplied and borrowed shares for each asset, sets spoke add and draw caps, applies the utilization-based drawn rate, and enforces the accounting invariants described in the V4 overview.
I
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Isolation mode
An Aave V3 constraint for a risky collateral. A user who enables an isolated asset as collateral can borrow only the assets governance has listed for that isolation setting, and only up to a debt ceiling.
L
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Liquidation bonus
Extra collateral transferred to a liquidator beyond the value of the debt repaid. In Aave V3 the bonus is a static reserve parameter. In V4 it varies with health factor between a minimum and a configured maximum.
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Liquidation threshold
The percentage of collateral value that debt may reach before a position can be liquidated. It is distinct from the loan-to-value used to open a borrow: a position can be forbidden from borrowing more and still be above the liquidation threshold.
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Liquidity index
The cumulative supply-interest multiplier for an Aave reserve. Supplier balances are stored in scaled units and converted to underlying units by this index, so interest does not require a token transfer to each supplier.
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Liquidity pool
A contract that holds reserves of two or more assets and prices swaps against those reserves. The pool’s accounting, not an order book, determines the execution price. Different protocols represent the liquidity provider’s claim as an ERC-20, an NFT, or an internal share.
M
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Metapool
A Curve pool that pairs one asset with the LP token of another Curve pool. A trader can swap the new asset against any coin inside the base pool, while the base pool’s liquidity stays in its own contract.
N
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Node operator
An organization or module participant that runs validators for a liquid staking protocol. Lido does not operate every validator itself. Rewards, penalties, and liveness depend on those operators and on Ethereum’s consensus rules.
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Normalized debt
Maker’s art field: vault debt stored before the stability-fee multiplier. Current debt is art multiplied by the collateral type’s rate. Updating the rate updates every vault of that type without writing each vault.
O
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Oracle
A contract or committee that brings an off-chain or cross-domain observation on chain, such as a price, a validator balance, or a collateral exchange rate. The observation is an input to solvency or accounting. It is not enforced by the AMM or lending invariant itself.
P
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Peg stability module
A Maker facility that swaps DAI with an approved external stablecoin at a fixed rate, within a debt ceiling. Sky’s current token-route documentation points integrators to LitePSM for DAI–USDC and a USDS–USDC wrapper. It is not a vault and it does not price the swap on a curve.
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Proxy
A contract whose address stays fixed while a separate implementation contract holds the logic. Calls are delegated to the implementation. Aave V3 markets and Sky’s USDS token use this pattern. Uniswap’s core pools are documented as non-upgradeable instead.
R
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Rebase
A balance update that changes how many tokens an account holds without a transfer. stETH rebases when Lido’s accounting report changes the value of each share. wstETH avoids that by keeping a static balance whose stETH value changes.
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Reserve factor
The share of borrow interest that an Aave reserve diverts to the treasury rather than to suppliers. Because of it, the supply rate is lower than utilization multiplied by the borrow rate.
S
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Sky Savings Rate
The governance-set rate paid to USDS deposited in the sUSDS vault. Sky’s documentation describes it as funded by protocol revenue and distinct from a utilization curve. sUSDS is the ERC-4626 token for that deposit.
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Spoke
An upgradeable, user-facing lending module in Aave V4. Users call the spoke. The spoke draws and returns liquidity at a hub, applies its own oracle and collateral configuration, and can be added or halted without moving the hub’s reserves to a new contract.
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Stability fee
The interest rate on Maker vault debt. The Jug stores a per-second rate. Calling drip folds the accrued multiplier into the Vat’s rate for that collateral type, which increases art · rate for every vault of that type and credits the system surplus.
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StableSwap
Curve’s invariant for assets that should trade near a common price. It blends a constant-sum region, controlled by the amplification coefficient, with constant-product behavior when the pool is imbalanced.
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stETH
Lido’s rebasing liquid staking token. A holder’s balance changes when the protocol’s share rate changes. The balance represents a claim on pooled ether, including rewards and penalties, not a fixed one-to-one claim on a specific validator.
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sUSDS
Savings USDS, an ERC-4626 vault for the Sky Savings Rate. Depositing USDS mints shares. The share price accrues with the savings rate. Sky’s token routes note that sUSDS and the older sDAI token are not one-for-one claims on each other.
T
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Tick
A discrete price boundary in Uniswap v3 and v4. Tick i represents the price 1.0001^i, so one initialized step of one tick is one basis point. Pools only initialize ticks on a spacing that depends on the fee tier.
U
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USDS
Sky’s upgrade of DAI. The official converter exchanges it with DAI at one-to-one, with no fee, and the documentation says a fee cannot be enabled on that route later. The token contract is upgradeable through a UUPS proxy.
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Utilization
Borrowed liquidity divided by supplied liquidity in a lending reserve. Aave’s interest strategy uses it as the main input to the borrow rate: rates rise slowly up to an optimal utilization and faster after that.
V
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Variable debt token
The non-transferable token that records variable-rate debt in an Aave V3 market. Its balance is principal plus accrued borrow interest. The V3 pool documentation says new borrows pass interest-rate mode 2, the variable mode. Stable-rate mode is deprecated.
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Vault
A Maker position stored in the Vat as an urn: ink is locked collateral and art is normalized debt. The vault is not an ERC-4626 vault. sUSDS is a separate tokenized savings vault.
W
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Withdrawal request
A Lido queue entry that burns or locks stETH and later pays ETH. The request is an ERC-721 called unstETH. It can be claimed only after the accounting oracle finalizes it.
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wstETH
Wrapped stETH. The wrapper locks stETH and mints a balance equal to the underlying shares, so the balance does not rebase. Its value in stETH rises when the share rate rises. Lido’s integration guide recommends it for contracts that assume a static ERC-20 balance.