The Jet Protocol - Jet Protocol, or the Protocol, is a decentralized, non-custodial protocol that uses a collection of smart contracts that provides lending and borrowing functions.
Lending and Borrowing Definitions
Asset - Refers to the digital token, cryptocurrency, or digital asset used in the protocol. For example, SOL or USDC.
Collateral - The asset deposited with the protocol to secure a loan.
Debt - The value of the loan that is owed or due to the Protocol.
Deficit - The amount by which something, especially a sum of value, is smaller than what is expected and required.
Collateralization Ratio ("C-Ratio") - The value of your collateral divided by the value of your debt. You are required to over-collateralize your loan, i.e. the fair market value of your deposited assets must exceed the value of the amount you are allowed to borrow. This provides for a reduction because the Protocol may seize this collateral in order to recoup the value of the loan in the event of default on a loan. See also, Maximum LTV.
Deposit interest rate - The instantaneous interest rate being earned by depositors. This rate is expressed in annualized form, does not reflect the effects of compounding, and is inclusive of any protocol fees that may be in place. The rate changes as the utilization ratio of the deposited asset changes.
Borrow interest rate - The instantaneous interest rate being paid by borrowers. This rate is expressed in annualized form, does not reflect the effects of compounding, and is inclusive of any protocol fees that may be in place. The rate changes as the utilization ratio of the borrowed asset changes.
Maximum LTV - The maximum ratio of a loan allowed by the Protocol. The Loan-to-value ratio (LTV), is a measure of risk used by the Jet Protocol when deciding how large of a loan to approve. Your LTV represents the relationship between the size of the loan you take out and the value of the property that secures the loan. See also, Collateralization Ratio.
Utilization Ratio - The fraction of a reserve’s assets that have been borrowed. For example, if the USDC reserve is worth $100,000,and the amount owed to the reserve by borrowers is $65,000, then the utilization ratio is 65%.There would be $35,000 available for further borrowing.
Liquidity - The efficiency or ease with which an asset can be converted into stablecoins without affecting the asset’s market price.
Liquidation Premium - Additional collateral is delivered to liquidators who repay the debt of accounts that have fallen below the minimum collateralization ratio. The dollar value of this additional collateral is equal to the Liquidation Premium times the dollar value of the repaid debt. The additional collateral is paid from the account of the user being liquidated.
Liquidation - The process of selling some of a borrower’s collateral to a third party, called a liquidator. The liquidator pays for the collateral using the token in which the debt is denominated, thereby (partially) repaying the borrower’s debt. The sale price is determined by an oracle, and is intended to be a fair market price. An incentive fee is paid to the liquidator, see Liquidation Premium.
Default - The failure to repay a debt, including interest or principal, on a loan or security. A default can occur when a borrower is unable to make timely payments, misses payments, or avoids or stops making payments.