# Key Terms

### Key Terms

**`VT/Vault`**

Vault token attached and exposed to multiple instruments.&#x20;



**`Instruments`**

We characterize **`Instruments`** as any ground for a specific kind of financial transaction between two parties; those who _demand(utilize)_ liquidity and those who _supply(invest)_ liquidity. Demanders require capital and put it to work and thereby pay the suppliers with returns(in the form of yield).&#x20;

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Some examples:&#x20;

a) In the case of a loan, the borrower _demands_ liquidity by being willing to pay the price of capital to lenders(suppliers).&#x20;

b) In the case of insurance, the insurance seller _supplies_ capital to insurance buyers(demanders), who pay the sellers the price of capital.&#x20;

c) In the case of market making, an efficient market _demands_ liquidity to be almost always available to takers, and by doing so rewards the market makers(suppliers) a certain amount of spread and fees.
{% endhint %}

An Instrument could take the form of, but is not limited to, cash flow generating assets such as unsecured/collateralized loans and volatility selling positions or a contract that simply buys and hold financial assets. For example, an **`Instrument`**  could be a **`creditline`** contract. The principal would be supplied from **`VT`**, and borrowers would interact with this contract to borrow and repay the principal. After the loan matures, repaid capital and interest would be directed back to **`VT`**. More examples can be found in the [_Instrument Examples_](../instrument-examples-and-usage) section.&#x20;

An **`Instrument`** contract could be arbitrarily complex. All the system requires is it to inherit from the protocol's base implementation.&#x20;



**`longZCB`**

Token that accrues junior tranche returns of the underlying **`Instrument`**.These are concentrated and levered bets on a single **`Instrument`**, while **`VT`** is a passive and senior investment in a pool of instruments. See diagram [here](high-level-description). They are programmed such that the purchaser’s collateral would be used as first loss capital. Given a counterparty(**`shortZCB`** buyers), its open interest can scale arbitrarily(total amount of minted **`longZCB`**).&#x20;



**`shortZCB`**

a tokenized borrow+sell position of **`longZCB`**. Pays off positively when the instrument fails to be profitable.&#x20;



**`Reputation`**

A proxy of a manager’s risk assessment capability. Updated at the completion of each instrument’s cycle.
