A collateral asset is a digital item pledged by a borrower to secure a loan on a decentralized platform. This asset acts as security, ensuring the lender can recover funds if the borrower defaults. Its value typically exceeds the loan amount, providing a buffer against market volatility. The practice underpins various decentralized finance lending protocols.
Context
The stability and liquidity of collateral assets remain a central concern for DeFi lending markets. Fluctuations in their market price can trigger liquidations, impacting both borrowers and protocol stability. Regulatory discussions frequently address how to classify and manage these assets within broader financial frameworks. The ongoing development of new asset types introduces additional considerations for risk assessment.
Hyperliquid's introduction of USDH, a native stablecoin, strategically internalizes liquidity control and yield capture, reducing external stablecoin reliance for its derivatives exchange.
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