In the context of cryptocurrency, Collateral refers to assets that are pledged as security for repayment of a loan or performance of an obligation in a DeFi platform or other blockchain-based financial arrangement.
Collateral is a foundational concept in decentralized finance (DeFi), where it enables lending, borrowing, and other financial services without traditional credit checks. Cryptocurrencies like Ether (ETH) can be used as collateral to borrow other assets or participate in financial protocols. The requirement for collateral addresses the trustless nature of blockchain transactions, ensuring parties are protected in the absence of centralized intermediaries.
