> For the complete documentation index, see [llms.txt](https://lo-fi.gitbook.io/docs/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://lo-fi.gitbook.io/docs/lo-fi/faqs/terms-and-mechanisms.md).

# Terms and Mechanisms

## Compounding

Earning a return on gains you've already made from previous periods is what is commonly referred to as compounding.

 **For example**, consider a 3% daily APR on an initial investment of $100.

 After 24 hours it would grow to $103.

 After 365 days without compounding: $100x(1+((0.03\*365)) = $1195.

 After 365 days, compounding once daily: $100x(1.03)^365 = $4,848,272.

## Expansionary epoch

An expansionary epoch is the amount of **LOW** that is **printed** by **staking SLOW** in order to **increase the total circulating supply of LOW**.

To simplify the explanation with a hypothetical **example**, let’s say an epoch is 6 hours long, there are 7,000 LOW in the circulating supply and 100,000 SLOW staked.

The investor is currently holding 100 LOW and has 1,000 SLOW staked.

If the emission rate is 2% based on the existing circulating supply, at the end of first epoch he/she will have 100 + (7,000 x 1.02 x 65% x (1,000/100,000)) = 146.41 LOW

Let’s say the emissions decrease to 1.5% as the total LOW's circulating supply reached 15,000 LOW and there is no change on his/her shares % of SLOW, he/she will then have:

146.41 + (15,000 x 1.015 x 65% (1,000/100,000)) = 245.37 LOW at the end of second epoch.

## Contraction Period

During contraction period, Boardroom will **not** mint any LOW **(NO REWARDS will be given on Boardroom)** while TWAP < 1.

## Debt Phase

Debt Phase describes the early stages of expansion that **starts from contraction** where there's **Bonds (BLOW) to be redeemed**.

**65% of Expansion** during Debt Phase is allocated to the **Treasury** to prepare for the **BLOW redemption**.&#x20;

{% hint style="warning" %}
This amount is still reserved regardless of whether or not BLOW Holders are redeeming BLOW.
{% endhint %}

As mentioned previously, once LOW in Treasury is sufficiently full to **meet all the circulating bond redemption**, **expansion** rates will **resume** to normal. If there is no debt (BLOW), it will follow **maximum capped expansion %**.

## Orientation to Boardroom Staking

**Epoch number** refers to the **current epoch** in which Lo-fi is in.

Next **Seigniorage** indicates a **countdown timer** to the next epoch. (Each epoch duration lasts for 6 hours)                                                                                                              &#x20;

**APR** refers to the simple **returns in USD value** relative to the amount of SLOW staked (USD value).

{% hint style="info" %}
APR **fluctuates** from time to time and is dependent on certain factors such as:

* Price of LOW
* Price of SLOW
* Amount of SLOW staked in Boardroom (Total Value Locked)
  {% endhint %}