| aTokens | Interest-bearing tokens received by users when they supply assets to Aave. aTokens represent the user’s share of the liquidity pool and accrue interest in real-time. | |
| APY | Annual Percentage Yield, which is the yield/interest after a year, including compounding interest. This differs from APR, which does not account for compounding effects. | |
| Borrow Cap | A limit set by Aave Governance on the maximum amount of an asset that can be borrowed from the protocol. This helps manage exposure and risk associated with each asset. | |
| Collateral | An asset supplied to Aave to secure a borrowing position. The collateral must exceed the value of the borrowed amount to ensure the protocol's solvency. | |
| Cooldown Period | A mandatory waiting period that stakers must observe before they can unstake their tokens from the Safety Module. | |
| Credit Delegation | A feature where users can delegate their borrowing power to another user who can then take out loans using the collateral of the delegator. This is facilitated through the Aave Protocol's smart contracts. | |
| Debt Ceiling | The maximum amount of debt that can be issued against an isolated asset. Used to limit the risk exposure to a single collateral type. | |
| E-Mode | Efficiency Mode allows borrowers to extract higher borrowing power when using correlated assets (e.g., stablecoins). | |
| Flash Loan | A type of uncollateralized loan offered by Aave, which must be borrowed and repaid within one transaction block. | |
| GHO | A decentralized, overcollateralized stablecoin that is fully backed, transparent, and native to the Aave Protocol. It is governed and managed by the Aave DAO. | |
| Governance Power | Refers to the ability to create proposals or vote in Aave’s governance system, based on AAVE, stkAAVE, or aAAVE token holdings. | |
| Health Factor | A ratio that determines the health of a user's loan position. It compares the value of the user's collateral to their borrowed assets. A health factor below 1 triggers liquidation. | |
| Isolation Mode | A feature in Aave V3 that limits borrowers to borrowing only certain stablecoins when using assets marked as isolated. It helps mitigate risk by restricting the total debt exposure to a single asset. | |
| Liquidation | The process that occurs when a borrower’s health factor drops below 1, resulting in the sale of collateral to repay part of the debt and bring the position back to a safer level. | |
| Liquidation Bonus | The bonus provided to liquidators as an incentive to purchase undercollateralized assets in a liquidation event. It is expressed in percentage points. | |
| Liquidation Threshold | The point at which a loan becomes eligible for liquidation due to insufficient collateral relative to borrowed funds. The threshold is defined per asset and determines the collateral value required to maintain a position. | |
| Liquidity Index | Tracks the cumulative interest earned by a reserve over time, used to calculate accurate interest payments. | |
| Loan To Value (LTV) | The maximum percentage of a collateral asset's value that can be borrowed. For example, an LTV of 75% means that for every 1 ETH of collateral, 0.75 ETH can be borrowed. | |
| Network Risk | Risks associated with the blockchain networks on which Aave operates, such as congestion, security vulnerabilities, or network failures. | |
| Oracle | A service used by Aave to fetch external data, such as the prices of assets, which is critical for determining the value of collateral and debt. | |
| Portal | A cross-chain liquidity feature in Aave V3 allowing liquidity to flow between Aave markets on different blockchains. This is made possible through governance-approved bridges. | |
| Ray units | A unit of measurement with 27 decimals, used by Aave for internal calculations to ensure precision, particularly for rates and exchange values. | |
| Reserve Factor | A percentage of interest accrued by borrowers that is allocated to the Aave Treasury to help safeguard the protocol. | |
| Risk Admin | An entity or automated system responsible for adjusting risk parameters in Aave without going through a governance vote. This allows Aave to respond quickly to unforeseen risks. | |
| Safety Module | A staking mechanism where AAVE tokens are staked to act as insurance in case of a shortfall event. Stakers earn rewards but are also exposed to slashing risk. | |
| Siloed Borrowing | A feature in Aave V3 that restricts certain assets to being borrowed alone, mitigating the risk of price manipulation or illiquid assets affecting the protocol's solvency. | |
| Supply Cap | A limit set on the total amount of a particular asset that can be supplied to the Aave protocol. | |
| Utilization Rate | A metric that determines the proportion of borrowed assets to the total available assets in a reserve. A higher utilization rate indicates higher borrowing demand. | |
| Voting Power | The amount of influence a user has in governance decisions, determined by the amount of AAVE, stkAAVE, or aAAVE they hold. | |