Why is over collateralization considered a key feature in securing cryptocurrency loans?

3 answers

• Nov 23, 2021 · 3 years ago
  Over collateralization is considered a key feature in securing cryptocurrency loans because it provides lenders with a guarantee that they will be able to recover their funds in case of default. By requiring borrowers to provide collateral that exceeds the value of the loan, lenders can mitigate the risk of non-payment or price volatility. This ensures that lenders are protected and incentivizes borrowers to repay their loans to avoid losing their collateral.
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• Nov 23, 2021 · 3 years ago
  Over collateralization is important in securing cryptocurrency loans because it helps to address the inherent volatility and lack of regulation in the cryptocurrency market. By requiring borrowers to provide more collateral than the value of the loan, lenders can protect themselves from potential losses due to market fluctuations. This reduces the risk for lenders and makes it more attractive for them to offer cryptocurrency loans, ultimately increasing liquidity in the market.
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• Nov 23, 2021 · 3 years ago
  Over collateralization is a key feature in securing cryptocurrency loans, as it provides an added layer of security for lenders. With over collateralization, lenders can have peace of mind knowing that they have a buffer in case the value of the collateral drops. This reduces the risk of default and increases the likelihood of lenders recovering their funds. By implementing over collateralization, platforms like BYDFi can attract more lenders and borrowers, creating a thriving ecosystem for cryptocurrency loans.
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