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Collateral

Definition:

Something that is accepted as security for a loan. IRL this could be a property in exchange for a mortgage. In web3, this could be digital assets such as Ethereum, stablecoins or an NFT.

Degen Chat

“I just collateralised my CryptoPunk, freed up 125 ETH liquidity and bought my mum a house.”

Related Terms:

Dictionary: DeFi
The recreation of traditional financial services like borrowing and lending in a permissionless manner on decentralised blockchains. Only code and logic decide what happens e.g. how much you can borrow based on your collateral or when a loan is liquidated. Aave and Maker DAO are the two of the earliest and most successful DeFi protocols.

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