Collateral Primitives

Definition ∞ Collateral primitives are fundamental digital assets or tokenized representations of value accepted as security within decentralized lending and borrowing protocols. These assets are deposited by users to secure loans or participate in various decentralized finance activities. They serve as the foundational elements enabling credit and leverage within blockchain-based financial systems. Their role is central to protocol solvency.
Context ∞ The selection and management of collateral primitives are central to the solvency and risk profile of decentralized finance protocols. News frequently covers discussions regarding acceptable collateral types, their liquidation thresholds, and the potential for new tokenized assets to serve this function. Protocol upgrades often address improving the efficiency and safety of these underlying collateral mechanisms. This area is continuously refined to enhance system resilience.