Definition ∞ Collateral management involves the processes and systems used to oversee assets pledged as security for financial obligations. In decentralized finance (DeFi), this typically pertains to the locking of digital assets in smart contracts to secure loans or other financial instruments. Effective collateral management ensures that the value of the pledged assets adequately covers the debt, mitigating counterparty risk. It is a critical component for the stability of lending protocols.
Context ∞ Discussions on collateral management in crypto news often revolve around the health of decentralized lending platforms and the potential for liquidations during periods of high market volatility. Key debates focus on the adequacy of over-collateralization ratios, the risk of cascading liquidations, and the design of more resilient collateralization mechanisms. Analysts are closely observing how these systems perform under stress to assess the stability of the DeFi sector.
Blockchain Knowledge
Cryptocurrency Foundation
Cryptospace Newsfeed
