Terminology

Key Concepts in Mighty Finance

Directional Bias

An indicator showing whether your position is Long, Short, or Delta Neutral on USDC, helping users understand market exposure.

Collateral

The initial deposit from your wallet, used as the basis for leverage.

Leverage

Borrowed funds from lending pools used to increase liquidity provision, enhancing potential returns.

Borrow Ratio

The composition of borrowed tokens in your leveraged position. Adjusting this ratio influences directional bias.

• Example: Borrowing S means repaying in S—if the price drops, users can buy back at a lower price and profit from the difference.

Position Size

The total value of a position, calculated as Collateral + Borrowed Tokens.

Slippage Settings

Defines the maximum allowable price difference (%) between position drafting and execution. If exceeded, the trade fails to open.

APR vs. APY

• APR (Annual Percentage Rate): The annual interest rate applied to borrowed funds, excluding compounding.

• APY (Annual Percentage Yield): The effective annual return, including the effect of compounding interest.

Swap

The number of tokens converted to open a Concentrated Liquidity Market Making (CLMM) position. The swap amount depends on the borrow ratio and leverage.

Liquidation Price

The price level at which a position is forcefully closed, returning borrowed funds to lenders.

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Opened Positions

• Pool – The token pair and its USD value.

• Debt – The amount of borrowed tokens used as leverage.

• Yield – The rewards earned from liquidity fees.

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Key DeFi Concepts

Impermanent Loss (IL)

The temporary loss liquidity providers experience when token prices change within an Automated Market Maker (AMM) system. The loss can become permanent if the price divergence continues.

Yield Farming

Providing liquidity to earn trading fees and governance token rewards. While profitable, it involves risks like market volatility, smart contract bugs, and liquidity risks.

Total Value Locked (TVL)

The total assets locked in a DeFi protocol, measuring its popularity and adoption. On Mighty Finance, TVL includes:

• The value of locked LP tokens

• Deposits not currently borrowed

Automated Market Maker (AMM)

A decentralized system where liquidity pools replace traditional order books. Prices are determined by a pricing algorithm (e.g., x * y = k) rather than direct trades between buyers and sellers.