Glossary of Terms

The following is a glossary of terms commonly used throughout the rest of the documentation. It pairs very well with the high level overview. If this is your first time reading about Levana Perps, some of the concepts below may not make sense on first read. Our recommendation for getting up to speed is to:

  • Review this page, not getting hung up on concepts that don't make sense
  • Go through the high level overview, referring back to this page to check definitions
  • Review the slides
  • Come back to this page; the terms should make much more sense at that point
  • Base asset: the asset being speculated on. In a hypothetical ATOM/USD perps market, ATOM would be considered the base asset.
  • Quote asset: the currency used for denoting the price of the base asset. We are speculating on the price shift between base and quote assets. In the ATOM/USD case, USD would be the quote asset.
  • Collateral asset: the asset deposited into the perps system by both traders and liquidity providers. Due to the implementation of crypto-denominated pairs, this could be either the base or quote asset.
  • Notional asset: the opposite of the collateral asset. In the ATOM/USD market, if ATOM is used as collateral, USD is the notional. The concept of notional asset is an internal implementation detail of the platform; traders will generally want to think in terms of base and quote. This is also explored in more detail in crypto-denominated pairs.
  • Entry price: price of the asset at the time a position was opened. From a user perspective, price is always given in quote-per-base units (e.g. 10 USD per ATOM). Internally it will also be represented as notional-per-collateral.
  • Deposit collateral: the total amount of collateral asset deposited by a trader to open a position.
  • Counter collateral: the amount of collateral locked from the liquidity pool in a position.
  • Max gains: the maximum amount of gains a trader can achieve on a position. Unlike other platforms, Levana perps’ well-funded guarantees rely on having locked maximum gains for a position.
    • Note that max gains are not exposed in the UI, instead we use a take profit price for user convenience.
  • Leverage: how much to leverage your collateral when opening a position. Positive leverage means taking a long position and negative means taking a short position.
  • Notional size: the overall size of a position. This is the deposit collateral times leverage. It is stored in terms of the notional asset, and is converted to collateral using the entry price. Note that positive notional size is a long position and negative is a short position.
  • Net notional: the sum of the notional size of all open positions. A positive net notional means that longs are more popular than shorts and therefore longs will pay a funding payment to shorts.
  • Delta neutral: when the net notional in the protocol is 0, meaning an equivalent value of longs and shorts are open. We strive to keep the protocol delta neutral to protect liquidity providers from price exposure risk.
  • Trading fee: fee paid by traders when opening or updating positions. This is split between the protocol and liquidity providers following the protocol tax config value. By default, 30% goes to the protocol, 70% goes to LPs.
  • Delta neutrality fee: a fee paid when an action moves the protocol away from delta neutral, and received when an action moves the protocol towards delta neutral. For example, if longs are more popular than shorts, opening a long will incur paying out a fee, and opening a short will receive a payment from the delta neutrality fund.
  • Borrow fee: fee paid by traders to liquidity providers for locking up liquidity. The fee is split between the protocol and LPs using the same protocol tax as the trading fee uses. This is an ongoing fee collected on a continuous basis as long as the position remains open.
  • Active collateral: the amount of collateral available within a position. This will start off equivalent to deposit collateral minus fees paid at position open. However, as additional fees are paid and price movements are adjusted for, the active collateral will go up or down. Note that this will change the effective leverage of a position, since the notional size will remain fixed.
  • Liquidation price: the price at which a position will be force-closed because it risks being insolvent and unable to pay additional fees. This can occur because the price has moved or because fees have depleted the active collateral.
  • Take profit price: the price at which a position has achieved its maximum possible PnL by capturing all the counter collateral locked in the system. At this point, the position is force-closed and profits delivered to the user.
  • Liquifunding: a process performed when positions are updated, closed, and on a regular basis to collect fees, adjust balances for price exposure, and determine new liquidation prices.
  • Liquifunding delay: the time period of delay between a position being opened/updated/liquifunded and the next scheduled liquifunding.
  • Staleness period: The time interval that a position can remain open after the completion of the liquifunding delay without risking illiquidity. If a position remains open past this period, the protocol is considered stale.
  • Notional size in collateral (previously called notional value): This is the notional size of the position converted to the collateral asset at the current exchange rate.
  • Liquidation margin: funds set aside within a position’s active collateral that can cover the maximum potential fees the position can occur until its next “staleness” point. If the position if not liquifunded before that staleness point, the entire protocol becomes stale since we cannot guarantee well fundedness.
  • Position size: exposure to the base asset of the position.
  • Carry leverage: the amount of leverage we assume cash-and-carry traders would use for balancing the market. This setting is present to ensure we leave sufficient liquidity for balancing positions.