Borrowing against Assets describes the practice of obtaining a loan by pledging existing holdings as security. In the digital asset space, this typically involves depositing cryptocurrency into a lending protocol or centralized platform to secure a loan, often denominated in stablecoins. The collateral mitigates risk for the lender, allowing for non-custodial or trust-minimized credit arrangements. Should the borrower fail to repay, the pledged assets may be liquidated.
Context
This financial mechanism is a fundamental component of decentralized finance (DeFi), enabling users to access liquidity without divesting their crypto holdings. News often covers the liquidation risks associated with volatile collateral assets, particularly during periods of market downturn. Ongoing discussions address the need for robust risk management frameworks and clearer regulatory guidance for these lending activities.
We use cookies to personalize content and marketing, and to analyze our traffic. This helps us maintain the quality of our free resources. manage your preferences below.
Detailed Cookie Preferences
This helps support our free resources through personalized marketing efforts and promotions.
Analytics cookies help us understand how visitors interact with our website, improving user experience and website performance.
Personalization cookies enable us to customize the content and features of our site based on your interactions, offering a more tailored experience.
