Debt Financing

Definition ∞ Debt financing involves borrowing funds that must be repaid, typically with interest, over a specified period. In the context of digital assets, this can include loans collateralized by cryptocurrency, decentralized lending protocols, or the issuance of tokenized debt instruments. This method allows entities to acquire capital without relinquishing equity ownership. It introduces specific risk considerations related to collateral volatility and smart contract security in decentralized finance.
Context ∞ Debt financing within the digital asset space is a rapidly growing sector, presenting both opportunities and regulatory challenges. A significant discussion point involves the appropriate collateralization ratios for volatile crypto assets and the legal enforceability of decentralized debt agreements. Future regulatory clarity and the maturation of decentralized lending platforms will be critical for expanding the reach and stability of crypto-native debt markets.