Definition ∞ An onchain money market is a decentralized lending and borrowing platform built directly on a blockchain. Participants can supply digital assets to earn interest or borrow assets by providing collateral, all governed by smart contracts. These markets operate transparently and permissionlessly, fostering efficient capital allocation within the digital asset ecosystem. They represent a core component of decentralized finance.
Context ∞ The risks associated with collateralization ratios and smart contract security in onchain money markets are continuous subjects of scrutiny. Debates often concern the potential for liquidations during periods of high volatility and the necessity for robust risk management protocols. Future innovations aim to enhance capital efficiency and introduce more sophisticated financial products within these decentralized environments.
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