# Glossary

## APR

Annual Percentage Rate, is the annualized interest rate without taking the effect of compounding into account.

## APY

Annual Percentage Yield, is the normalized representation of an interest rate, based on a compounding period over one year. Note that APYs provided are rather ballpark level indicators and not so much precise future results.

## BCV

Bond Control Variable, is the scaling factor at which bond prices change. A higher BCV means a lower discount for bonders and higher inflation by the protocol. A lower BCV means a higher discount for bonders and lower inflation by the protocol.

## DAO

Decentralized Autonomous Organization, is a governance mechanism for making decisions in a more trustless and collaborative way. Voting rights are often bound to a governance token. In Dao.Finance the governance token is sFAO.

## DCV

Deflation Control Variable, is the scaling factor at which protocol defined buy pressure changes. A higher DCV means more buy pressure from the protocol, resulting in a higher deflation. A lower DCV means less buy pressure from the protocol, resulting in a lower deflation.

## EVM

Ethereum Virtual Machine, is a state machine in which all Ethereum accounts and smart contracts live. At any given block in the chain, Ethereum has one and only one canonical state, and the EVM is what defines the rules for computing a new valid state from block to block.

## Liquidity Bonds

Liquidity bonds are LP token bonds. Examples are FAO-DAI LP bonds.

## PCV

Protocol Controlled Value, is the amount of funds the treasury owns and controls. The more PCV the better for the protocol and its users.

## POL

Protocol Owned Liquidity, is the amount of LP the treasury owns and controls. The more POL the better for the protocol and its users.

## PoR

Proof of Reserve, is the mechanism of strengthening the reserve of Dao.Finance treasury via the sales of bonds. Bonders provide liquidity to the treasury, thereby building its reserve. In return for their service, bonders get paid in FAO.

## Reserve Bonds

Reserve bonds are single asset bonds. They are sometimes referred to as "naked" bonds. Examples are DAI bonds.

## Reward Rate

Reward rate is the configured percentage of FAO distributed to all stakers on each rebase relative to the total supply. The reward rate is precisely set by the policy team.

## Reward Yield

Reward yield refers to the actual amount of FAO received by each staker on each rebase. The reward yield is a rough target from a policy point of view. It can almost never be maintained precisely due to e.g. fluctuating amounts of FAO staked.

## RFV

Risk Free Value, is the amount of funds the treasury guarantees to use for backing FAO.

## LP

*Liquidity Provider token* is the token received when providing liquidity on DEXs. For instance, liquidity bonds will require LP tokens of the FAO-DAI pair.

## TVL

Total Value Locked, is the dollar amount of all FAO staked in the protocol. This metric is often used as growth or health indicator in DeFi projects.

## TaaS

Treasury as a Service, is the business model of decentralized custody of partnership funds. Dao.Finance is designed for TaaS by selling bonds and absorbing partners' liquidity into its treasury as a result.

## TWAP

Time Weighted Average Price, is the average price of an asset over a specified time. TWAPs are used to represent the fair value of an asset as defined by the market.

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**Good to know:** depending on the product you're building, it can be useful to explicitly document use cases. Got a product that can be used by a bunch of people in different ways? Maybe consider splitting it out!
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