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description: Commonly used terms
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# Terminologies

## Total Value Locked (TVL)

Total Value Locked (TVL) refers to the total amount of funds being deposited into a DeFi protocol. In context of Parallax Finance, these are investments into our DeFi product, such as the vault strategies.&#x20;

## Annual Percentage Yield (APY)

Annual Percentage Yield (APY) is the real rate of return that will be earned over a year when the earned interest is compounded.

Periodically, compound interest is applied to the entire amount invested, growing the balance. The amount of earned interest will be larger as the balance compounds. With more periods of compounding the interest, the APY will be higher.&#x20;

Generally, APY is seen from the viewpoint of the depositors, whose funds are earning interest for a specified duration.&#x20;

## Annual Percentage Yield (APR)

An annual percentage rate (APR) is the annual interest rate that borrowers of a loan will pay or that investors will earn on an investment they made.&#x20;

APR should not be confused with APY, where it is the calculation taking into account effects of compounding interest. Simply put, APR's calculation is the simple interest rate.&#x20;

## Auto-Compounding

Compounding refers to the reinvestment of capital gains or interest earned to generate further earnings or interest. With more compounding periods, the principal amount earns more interest. For Parallax Finance, each compounding period is determined in the smart contract.&#x20;

Auto-compounding refers to the automation of the reinvestment of the interest, so the user does not have to actively manage funds and reinvest the principal. Yet, they are able to enjoy exponential growth in funds.&#x20;

## Protocol Rewards

Protocol rewards are a valuable way to boost liquidity in the vault by incentivising token holders.  Rewards are denominated in native protocol token as rewards when users stake in the designated vault strategy.&#x20;

## Liquidity Pool (LP) Staking

As token holders provide liquidity into the vault, called staking, they receive LP tokens where they can choose to withdraw in any crypto asset.&#x20;

## DAO tasks

Coming soon...

## Governance

Coming soon...
