Collateral
Assets deposited as security for a loan, which can be seized if the borrower fails to repay.
In-Depth Explanation
DeFi lending requires overcollateralization—depositing more value than you borrow. Different assets have different collateral factors based on volatility and liquidity. If collateral value drops, positions face liquidation. Collateral quality significantly affects lending protocol risk.
Related Terms
Collateralized Debt Position
CDPA loan where users deposit collateral to mint or borrow assets, with liquidation risk if collateral value falls.
Liquidation
Forced closure of an undercollateralized position, typically with a penalty to the borrower.
Health Factor
A metric showing how close a lending position is to liquidation, where below 1 means liquidatable.
Loan-to-Value Ratio
LTVThe ratio of borrowed amount to collateral value, determining how much you can borrow against your deposits.
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The difference between the expected price of a trade and the actual executed price.
Maximal Extractable Value
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Sandwich Attack
An MEV extraction technique where an attacker places transactions before and after a victim's trade to profit from the price impact.
Frontrunning
Placing a transaction ahead of a known pending transaction to profit from the anticipated price movement.