Collateral

Assets pledged to secure a loan or a minted position.

التمويل اللامركزي Also called collateralised, overcollateralised, collateralization ratio

DeFi lending is typically overcollateralised: to borrow 100 dollars of stablecoins you might lock 150 dollars of ETH. The buffer absorbs price movement between blocks.

If the collateral value falls below the required ratio, the position is liquidated automatically and part of the collateral is sold to repay the debt.

Back to the Crypto Glossary