How Does the Concept of ‘On-Chain Collateral’ Improve Risk Management?

On-chain collateral is assets locked within a smart contract to secure a derivatives position. This improves risk management by ensuring the collateral is instantly verifiable and available for automated liquidation.

The smart contract continuously monitors the position's health against the collateral. This eliminates the need for manual collateral calls and reduces the risk of the counterparty failing to post margin in a timely manner, especially during market volatility.