Definition ∞ An on-chain repo, or repurchase agreement, is a financial transaction conducted entirely on a blockchain, where one party sells a digital asset to another with an agreement to repurchase it at a later date for a higher price. This mechanism functions similarly to traditional repurchase agreements but leverages smart contracts for automated execution and collateral management. It provides a way for participants to obtain short-term liquidity against digital assets. On-chain repos contribute to the development of robust digital money markets.
Context ∞ On-chain repos are a developing area within decentralized finance, aiming to replicate traditional money market functions using blockchain technology. A key discussion involves their potential for improving capital efficiency and transparency in digital asset lending and borrowing. News about new DeFi protocols offering repo-like services or regulatory considerations for such instruments provides current insight into their adoption.
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