Smart Debt

Definition ∞ Smart debt refers to a type of financial obligation or lending arrangement managed and executed through smart contracts on a blockchain. These debt agreements are automated, transparent, and self-executing, removing the need for traditional intermediaries. Terms and conditions are coded directly into the contract, ensuring enforcement without human intervention. This approach brings efficiency and immutability to lending processes.
Context ∞ In decentralized finance (DeFi) news, smart debt is a rapidly growing sector, offering new possibilities for borrowing and lending digital assets. Reports often highlight innovative DeFi protocols that facilitate collateralized loans, flash loans, and other debt instruments through smart contracts. The transparency and efficiency of smart debt are key attractions, though discussions also address associated risks like smart contract vulnerabilities and liquidation mechanisms. This area represents a significant evolution in financial services using blockchain technology.