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What is Collateral?

Crypto Terms Glossary: What is Collateral?

Collateral refers to an asset that is offered as security for repayment of a loan, to be forfeited in the event of a default (a situation in which an individual is unable to pay back a loan). When borrowing money on a decentralized finance (DeFi) lending platform, collateral in the form of a token must be locked. The collateral is returned upon repayment of the loan.

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