> For the complete documentation index, see [llms.txt](https://covermax.gitbook.io/covermax/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://covermax.gitbook.io/covermax/glossary.md).

# Glossary

## A

**aUSDC** : Aave's interest-bearing USDC token. Represents USDC deposited in Aave protocol that automatically earns lending yield.

**APY (Annual Percentage Yield)** : The annualized rate of return including compound interest effects.

**Arbitrage** : Trading strategy that profits from price differences between markets or assets.

## C

**Claims Phase** : 24-hour period where senior token holders have priority redemption rights.

**CM-JUNIOR** : CoverMax Junior Token - Higher risk token with subordinate claims on pool assets.

**CM-SENIOR** : CoverMax Senior Token - Lower risk token with priority claims on pool assets.

**Coverage Phase** : 72-hour active insurance period where claims can be submitted and processed.

**Coverage Ratio** : The proportion of total deposits actively providing insurance coverage.

**cUSDT** : Compound's interest-bearing USDT token. Represents USDT deposited in Compound protocol.

## D

**Deposit Phase** : 48-hour period where users can deposit yield-bearing assets and receive risk tokens.

**Dual-Tier System** : CoverMax's two-level risk structure with Senior and Junior tokens.

## E

**Emergency Mode** : Protocol state that restricts withdrawals to senior token holders only.

**ERC20** : Ethereum token standard that defines fungible token functionality.

## F

**Final Claims Phase** : Last 24-hour period where all remaining tokens can be redeemed.

**Fungible** : Assets that are interchangeable and indistinguishable from each other.

## I

**Impermanent Loss** : Temporary loss experienced by liquidity providers due to price divergence.

**Insurance Pool** : Collective funds deposited to provide coverage for potential claims.

## J

**Junior Token** : See CM-JUNIOR.

## L

**Lifecycle** : The complete 7-day cycle of protocol phases from deposit to final claims.

**Liquidity Provider (LP)** : User who supplies tokens to Uniswap pools to facilitate trading.

## M

**Mint** : Process of creating new risk tokens when users deposit assets.

## P

**Phase** : Distinct time period in the protocol lifecycle with specific rules and actions.

**Priority Claims** : Senior token holders' right to redeem assets before junior token holders.

**Protocol Parameters** : Configurable settings that govern protocol behavior (durations, minimums, etc.).

## R

**Redemption** : Process of exchanging risk tokens for underlying yield-bearing assets.

**Reentrancy Guard** : Security feature preventing recursive function calls that could drain funds.

**Risk Token** : ERC20 token representing a claim on insurance pool assets (Senior or Junior).

**Risk Tokenization** : Process of converting insurance positions into tradeable tokens.

## S

**Senior Token** : See CM-SENIOR.

**Slippage** : Price difference between expected and actual trade execution.

**Smart Contract** : Self-executing code on Ethereum that enforces protocol rules.

**Subordinate Claims** : Junior token holders' secondary position in asset redemption.

## T

**Total Value Locked (TVL)** : Combined value of all assets deposited in the protocol.

**Tradeable Risk** : The ability to buy and sell insurance exposure through token trading.

## U

**Underlying Assets** : The yield-bearing tokens (aUSDC, cUSDT) backing risk tokens.

**Uniswap** : Decentralized exchange where risk tokens are traded.

## V

**Vault** : Smart contract (RiskVault) that holds deposited assets and manages operations.

**Volatility** : Degree of price variation in risk token markets.

## W

**Withdrawal** : Process of redeeming risk tokens for underlying assets.

## Y

**Yield** : Returns generated from underlying assets and insurance operations.

**Yield-Bearing Asset** : Token that automatically accrues interest (aUSDC, cUSDT).

**Yield Farming** : Strategy of maximizing returns through various DeFi protocols.

## Numeric

**1:1 Ratio** : Equal distribution of Senior and Junior tokens for each deposit.

**2-Day Deposit** : Standard duration of the deposit phase.

**3-Day Coverage** : Standard duration of the active insurance period.

**7-Day Cycle** : Complete protocol lifecycle from start to finish.

***

Need more clarification? Check our FAQs or join our community channels.


---

# Agent Instructions
This documentation is published with GitBook. GitBook is the documentation platform designed so that both humans and AI agents can read, navigate, and reason over technical content effectively. Learn more at gitbook.com.

## Querying This Documentation
If you need additional information that is not directly available in this page, you can query the documentation dynamically by asking a question.

Perform an HTTP GET request on the current page URL with the `ask` query parameter, and the optional `goal` query parameter:

```
GET https://covermax.gitbook.io/covermax/glossary.md?ask=<question>&goal=<endgoal>
```

`ask` is the immediate question: it should be specific, self-contained, and written in natural language.
`goal` is optional and describes the broader end goal you are ultimately trying to accomplish on behalf of the user. GitBook uses it to tailor the answer towards what is most useful for that goal.

The response will contain a direct answer to the question and relevant excerpts and sources from the documentation.

Use this mechanism when the answer is not explicitly present in the current page, you need clarification or additional context, or you want to retrieve related documentation sections.