How Does Collateralization Work in Crypto Lending?

[AIcash]

Answer: Collateralization is the backbone of crypto lending:

Over-Collateralization: Borrowers provide more crypto than the loan’s value to protect lenders. Typical ratios range from 120% to 150%+ depending on volatility.

Dynamic Liquidation: Smart contracts monitor collateral value; if it falls below the maintenance threshold, collateral is automatically liquidated to repay the loan.

Multi-Collateral Options: Advanced platforms allow multiple asset types as collateral, which introduces risk correlation considerations.
Understanding these mechanics is crucial for leveraging assets without exposing oneself to forced liquidations.

[Pitchfork_IS_power]

Collateral is king — manage it well or the chain will do it for you