Definition ∞ Uncollateralized borrowing involves obtaining a loan without pledging any assets as security against potential default. The lender extends credit based solely on the borrower’s creditworthiness, reputation, or a predefined trust mechanism. This form of lending carries higher risk for the creditor.
Context ∞ In decentralized finance, uncollateralized borrowing is generally more complex than traditional lending due to the pseudonymous nature of blockchain transactions. News reports often discuss innovative approaches, such as reputation-based lending or flash loans, that seek to address this challenge. The development of robust credit scoring in DeFi is crucial for expanding this lending model.
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