Terminology
Page dedicated to definitions and explanations of terms in documentation
Vault
The name of the Vault, consisting of the names and symbols (e.g. SUI or USDC-USDT).
TVL (Total Value Locked)
The total amount of funds currently locked in the Vault. This represents the total value of assets provided by all users.
APY (Annual Percentage Yield)
APY represents the actual rate of return on your investment over a year, taking compounding into account. This means APY includes the interest earned on both the initial principal and the interest that accumulates during the period. As a result, APY is always higher than APR, assuming there is compounding.
Deposited
The amount of funds the user has deposited into the specific Vault. This represents the user's contribution to the Vault's total liquidity.
Earned
The total rewards the user has earned from participating in the specified Vault.
Performance fee
A operational fee collected by Kai Finance to support platform development, maintenance, and to ensure the smooth running of the protocol. This fee is only applied on the profits generated through your investments, aligning our interests with yours in maximizing returns.
Allocation
Each Vault can be allocated across multiple strategies, which are predefined sets of rules that determine how the Vault’s assets are managed. The Allocation section displays how the Vault's assets are distributed among these strategies.
Uniswap v3
Uniswap V3 allows users to provide liquidity for pairs of tokens within custom price ranges. Liquidity providers (LPs) can concentrate their funds in specific price ranges where they expect most trading to occur, increasing capital efficiency. As trades occur, fees are earned based on the liquidity provided in the active range.
Protocol
The decentralized exchange (DEX) in which the position is deposited. It operates as an Automated Market Maker (AMM) on the Sui Network, allowing users to trade and provide liquidity without the need for a central order book.
Collateral
The initial amount of funds deposited into the LP Vault. This forms the base for calculating the possible leverage. Users can deposit one or both tokens required by the LP pool. In some cases, part of the collateral may remain as extra collateral if the deposited amounts don’t match the required ratios for the Uniswap V3 pool.
Extra collateral
This is the portion of collateral that isn’t deposited into the LP pool due to the specific asset ratio requirements of Uniswap V3 pools. For example, if the provided collateral doesn't perfectly match the required ratios for the pool, the excess is held as extra collateral.
Debt
The amount of borrowed funds added to your collateral for the LP pool. Borrowed debt increases your position size and enables you to use leverage to potentially earn higher returns.
LP size
The total amount of funds deposited into the LP pool, which includes both the user’s collateral and borrowed funds (debt).
Assets
The total value of your position, including both your initial collateral and the borrowed funds. In simple terms, it’s the sum of your LP size and any extra collateral.
Equity
Your equity represents the value of your own capital within the position. Initially, it equals the value of your collateral, but it fluctuates as token prices change. It can be calculated as:
Price range
During position creation, users must set a price range for providing liquidity in the Uniswap V3 pool. The range is expressed as the price of Token A relative to Token B. Your position earns fees only when the current pool price is within this range.
In range ✅
A position is considered in range when the current pool price is within the set price boundaries. Only when the position is in range will it generate yield. Users can close and reopen positions at any time, and once the price returns within the range, yield generation resumes.
Out of range ❌
If the pool price moves outside the specified range, the position becomes out of range and stops generating yield. Borrowing interest continues to accrue during this time.
Leverage
Leverage allows you to borrow additional funds on top of your collateral, increasing your exposure in the LP pool. While leverage can boost profits, it also magnifies risks, as it increases the chance of liquidation if the position's value drops.
Example: If you use 3x leverage, you are borrowing an additional 2x on top of your deposit, so your total exposure in the pool is 3 times your initial deposit
Margin level
Margin level measures how much collateral you have relative to the borrowed debt. It indicates the safety of your position: a higher margin level means your position is safer, while a lower margin level means you’re closer to liquidation.
Example: A margin level of 1.5 means that your collateral is worth 1.5 times the debt you’ve borrowed
How leverage and margin level relate?
Leverage and margin level are inversely related. As you increase leverage, your margin level decreases, meaning your position becomes riskier. Conversely, maintaining a high margin level limits how much leverage you can take but keeps your position safer from liquidation.
Example: A margin level of 1.5 corresponds to a leverage of 3x, while a margin level of 2.0 corresponds to 2x leverage
Liquidation prices
When using leverage, there is always a risk of liquidation if the pool price falls outside the set liquidation price range. This range has both lower and upper bounds and represents the price of Token A relative to Token B. If the current pool price moves outside this range, your position will be liquidated to repay the debt.
Deleverage
Deleveraging is an automatic process triggered when a position's margin level drops below a certain threshold, but before it reaches liquidation. In this case, a portion of the assets is withdrawn from the LP pool and used to repay part of the debt, improving the margin level and reducing the risk of liquidation. This safety mechanism helps protect the user's position by lowering leverage and maintaining the stability of the investment.
Liquidation
Liquidation is the forced closing of your position by the protocol. It occurs when the value of your equity is about to fall below the value of your debt. This process ensures that lenders are protected by repaying the borrowed funds. Liquidation can be triggered by anyone.
Health
The health metric indicates the safety of a leveraged position based on its current margin level. It compares your margin level to the initial margin requirement and the liquidation margin. A health value close to 100% indicates a healthy position, while a value approaching 0% signals that the position is at risk of liquidation. If the health metric reaches 0%, the position will be liquidated.
Interest rates
The cost you pay to borrow funds from liquidity providers. Interest rates increase as the utilization of available liquidity increases, making borrowing more expensive
Lending pool utilization is high
When the majority of the liquidity in lending pools is utilized, borrowing costs can increase significantly. This warning informs the user that their position may become less profitable, or even unprofitable, once borrowing costs are factored in.
Status
The current status of a position: either open or closed. Open positions are active and continue to accumulate interest, even if they aren’t generating yield (i.e., if they are out of range). Closed positions have repaid the debt and returned the collateral to the user.
APR (Annual Percentage Rate)
APR reflects the simple interest rate earned on your investment over a year. Unlike APY, APR does not account for the effects of compounding.
APY (Annual Percentage Yield)
APY represents the actual rate of return on your investment over a year, taking compounding into account. This means APY includes the interest earned on both the initial principal and the interest that accumulates during the period. As a result, APY is always higher than APR, assuming there is compounding.
PNL (Profit and Loss)
This represents the net financial outcome of your position over a 24h period, showing whether your position has gained or lost value.
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