How Does Overcollateralization Mitigate Risk in DeFi Lending? ⎊ Path

How Does Overcollateralization Mitigate Risk in DeFi Lending?

Overcollateralization means the value of the assets locked as collateral is greater than the value of the loan received. This buffer protects the lender from sudden drops in the collateral's price.

If the collateral's value falls, the excess collateral absorbs the loss before the loan becomes under-collateralized, ensuring the lender can always recover the full loan amount upon liquidation.

How Does “Over-Collateralization” Mitigate the Risk of a DeFi Bank Run?

What Is “Overcollateralization” and Why Is It Necessary in DeFi Lending?

How Does Fractional Ownership of NFTs Impact Their Use as Collateral in DeFi Lending?

How Can an NFT Be Used as Collateral in DeFi Lending?

How Does the Exchange’s “Haircut” Policy Mitigate the Risk of Volatile Collateral?

What Is ‘Over-Collateralization’ and Why Is It Common in Immutable DeFi Lending?

How Do Liquidation Mechanisms Work for f-NFT Collateralized Loans?

How Does Over-Collateralization Mitigate Systemic Risk in DeFi?