Definition ∞ Decentralized leverage involves obtaining amplified exposure to digital assets through protocols operating on a blockchain without central intermediaries. This is typically achieved by borrowing assets against collateral to increase trading positions. Users can access greater capital than their initial holdings, aiming for larger potential returns. It inherently carries heightened liquidation risk.
Context ∞ Decentralized leverage remains a significant feature within the DeFi ecosystem, enabling advanced trading strategies and capital efficiency. News often reports on the risks associated with these protocols, including potential liquidations during market downturns. Regulatory bodies are increasingly examining the implications of decentralized leverage for market stability and consumer protection.
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