Collateral types refer to the various assets accepted as security for a loan or financial position. In decentralized finance, these assets are typically cryptocurrencies locked into smart contracts to back borrowed funds, such as stablecoins or other tokens. The range of accepted collateral can vary widely across lending platforms, influencing risk profiles and user accessibility. Platforms assess the volatility and liquidity of each asset to determine its suitability as collateral.
Context
Discussions around collateral types frequently appear in news concerning decentralized finance lending protocols and risk management. The introduction of new or less volatile collateral options can significantly impact market stability and borrowing opportunities. Debates often center on the decentralization and robustness of oracles used to price these diverse assets.
The Layer 2's targeted incentive program strategically directs capital toward high-efficiency looping strategies, prioritizing sustainable TVL over simple volume.
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