Tokenized Lending

Definition ∞ A form of decentralized finance where loans are facilitated using digital tokens as collateral or as the underlying instrument of the loan itself. This model allows for peer-to-peer lending and borrowing without traditional financial intermediaries. ‘Tokenized Lending’ offers novel avenues for capital allocation and yield generation.
Context ∞ ‘Tokenized Lending’ is presently a dynamic area within decentralized finance, with platforms exploring various collateral types and loan structures. Discussions are centered on the risks associated with volatile token collateral and the establishment of robust liquidation frameworks. The potential for these systems to provide liquidity to illiquid assets is a key driver of current development.