Collateral
Tokens you deposit so that you can borrow against them. If their value falls too far, the loan can be liquidated.
Collateral in more detail
A DeFi lending service lets you earn interest on tokens you deposit, or borrow against tokens you hold. There is no credit check, because every loan is backed by collateral worth more than the loan.
To borrow, you first deposit collateral. You can then borrow other tokens up to a fraction of its value. The loan is always smaller than the collateral, which is why it is called overcollateralised.
Suppose ETH falls 25%. Your collateral is now worth $7,500. The health factor is 7,500 × 0.80 ÷ 6,000 = 1.0. One more tick down and you are below the line.
All 128 terms · Checked against the lesson's sources on 10 October 2026.
The course by email
Five short emails to get you started, each built on one lesson. After that, one short email a month about what is new. No price tips and no hype.
Free. Unsubscribe any time. See our privacy notice.
Want your progress saved too? Create a free account.