🏋️Collateral Management

Asset Backing for Loan Security

What is Collateral?

Collateral is an asset that borrowers pledge to back a loan. It acts as a safety net for lenders, giving them the assurance that borrowers have a strong reason to repay their loans. If a borrower defaults, the lender can seize the collateral to recover the outstanding loan amount. Collateral can take various forms, such as real estate, vehicles, or other valuable assets, but it's a cornerstone of secured loans. It often allows borrowers to enjoy lower interest rates due to reduced lender risk.

The Dual Role of Collateral in Secured Finance

Collateral serves two main purposes in Secured Finance. First, it reduces the risk of loan default. If a borrower's Loan-to-Value (LTV) ratio crosses a certain threshold, or if the collateral's value falls below the loan's required value, the loan becomes eligible for liquidation. This mechanism protects lenders and builds confidence in our platform. Second, collateral eliminates the need for traditional credit checks, aligning with the DeFi ethos of open and inclusive financial services.

Collateral Currencies:

Secured Finance accepts Wrapped Bitcoin (WBTC), Ethereum (ETH), and USD Coin (USDC) as collateral currencies.

Wrapped Bitcoin (WBTC)

Bitcoin is the original cryptocurrency and is widely accepted and stable, making it an ideal choice for collateral. Wrapped Bitcoin is Bitcoin wrapped in the Ethereum Ecosystem.

Ethereum (ETH)

Ethereum is a widely accepted cryptocurrency and the primary blockchain for DeFi applications. Its smart contract functionality allows for complex applications, making it popular in the DeFi sector.

USD Coin (USDC)

USD Coin is a stablecoin pegged to the US dollar, offering less volatility than most other cryptocurrencies. It's a reliable choice for collateral, especially for those who want to avoid significant price fluctuations.

Future Plans: Expanding Collateral Options

While BTC, ETH, and USDC are our current collateral options, we recognize the benefits of diversifying the types of collateral we accept. We are actively considering the inclusion of additional assets to offer more flexibility and attract a wider range of users, thereby increasing our platform's overall liquidity.