Glossary
| Term | Definition |
|---|---|
| CTF | Conditional Token Framework — the ERC-1155 token standard used by Polymarket and others for prediction market positions. |
| Early-Closure Decay | Progressive reduction of a position's effective LTV as its market approaches resolution date. |
| ERC-1155 | Multi-token standard that allows a single contract to manage multiple token types. Used by prediction markets for outcome tokens. |
| ERC-4626 | Tokenized vault standard. VarlaPool implements this for lender deposits and share accounting. |
| Health Factor (HF) | Ratio of weighted collateral value to outstanding debt. HF < 1.0 triggers liquidation. |
| Liquidation | Process where a third party repays a borrower's debt in exchange for their collateral (plus a bonus), triggered when HF drops below 1.0. |
| Liquidation Threshold | The percentage at which a position's collateral value is counted for liquidation purposes. Always slightly higher than LTV. |
| LTV (Loan-to-Value) | Maximum percentage of collateral value that can be borrowed. Varies by risk tier: 80%, 65%, or 50%. |
| NegRisk | Polymarket's wrapper for multi-outcome markets. Allows YES/NO positions on individual outcomes within a multi-option question. |
| Oracle | System that provides on-chain price data for prediction market positions. Uses min(spot, TWAP) for manipulation resistance. |
| Position | An ERC-1155 token representing a stake in a prediction market outcome (e.g., 100 YES tokens on "Event X"). |
| Reserve Factor | Percentage of borrow interest diverted to the protocol reserve fund (currently 10%). |
| Resolution | The moment a prediction market settles — outcomes become either $0 (wrong) or $1 (right). |
| Risk Tier | Classification assigned to each position based on market liquidity, age, and volatility. Determines LTV. |
| Scaled Debt | A borrower's debt divided by the current borrow index. Actual debt = scaled debt × current index. |
| Staleness | When oracle data is too old (>15 minutes). Stale data blocks new borrows and withdrawals. |
| TWAP | Time-Weighted Average Price — smoothed price over a window (30 min default). Resists short-term manipulation. |
| Utilization | Ratio of total borrows to total pool assets. Drives interest rate calculations via the kinked curve model. |
| Vault Shares | ERC-4626 tokens representing a lender's proportional claim on the VarlaPool. Value increases as interest accrues. |