Definition ∞ Secure lending involves financial arrangements where assets are loaned with mechanisms in place to protect both the borrower and the lender from default or loss. This typically entails collateralization, where the borrower pledges assets of value exceeding the loan amount, which the lender can seize if repayment obligations are not met. In decentralized finance, secure lending protocols often use smart contracts to automate and enforce these collateral agreements, minimizing counterparty risk. The objective is to facilitate credit while maintaining capital protection.
Context ∞ The concept of secure lending is central to the development of robust and trustworthy decentralized finance ecosystems. News often highlights innovations in collateral management, liquidation mechanisms, and risk assessment within these platforms. Ensuring secure lending is paramount for attracting greater institutional participation and fostering wider adoption of crypto-based credit markets.
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