DeFiBeginner
Collateral
Assets pledged to support a loan or leveraged position.
PLAIN-ENGLISH DEFINITION
In more detail
Collateral gives a lending or trading system something to use if a position no longer meets its rules. In DeFi, contracts often track its value using price feeds and apply limits to what it can back. A deposit's market price can fall, so the same number of tokens may support less borrowing later.
IN THE WILD
How you might use it
You deposit ETH as collateral for a token loan, then watch the position’s health as ETH’s market price changes.
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