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How Can Smart Contracts Be Used to Collateralize a Decentralized Loan?

They automatically lock collateral and liquidate it if necessary, ensuring loan security and repayment without the need for a traditional bank.
Greeks.Live06.11.25

How Can Smart Contracts Be Used to Collateralize a Decentralized Loan?

A smart contract can automatically lock the borrower's collateral (e.g. cryptocurrency) in an escrow-like mechanism. The contract is programmed to release the loan funds upon collateral deposit.

If the loan is repaid, the contract returns the collateral. If the collateral value drops below a liquidation threshold, the contract automatically sells or liquidates the collateral to cover the debt, all without a bank or legal intermediary.

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