Key Concepts

Learn more about the fundamental key concepts to use AAVE Protocol

Term	Description
APY	Annual Percentage Yield, which is the yield/interest after a year, which includes compounding interest. Note that this is different from Annual Percentage Rate (APR), which does not take into account compounding effects.
Loan To Value	The maximum borrowing power of a specific collateral. If a collateral has a Loan to Value of 75%, for every 1 ETH worth of collateral the user will be able to borrow 0.75 ETH worth of principal currency. The Loan To Value is specified per collateral and expressed in percentage points.
Liquidation Threshold	The threshold of a borrow position that will be considered undercollateralized and subject to liquidation. If a collateral has a liquidation threshold of 80%, it means that the loan will be liquidated when the debt value is worth 80% of the collateral value. The liquidation threshold is specified per collateral and expressed in percentage points.
Net Borrow Cost	The net borrow cost is the debt APY minus the APY for the collateral supplied. If the values are positive you are paying to borrow, if negative you are paid to borrow.
Net Value	The Net Value is calculated as the current value of the collateral in your position minus the current debt express in USD.
Buying Power	The Buying Power specifies the maximum debt tokens you can draw to buy more collateral, based on your position. It uses Multiply and goes from the current loan to value to the maximum loan to value possible before liquidation.