overcollateralizing
Overcollateralizing is a practice common in various financial contexts, particularly in decentralized finance (DeFi) and traditional lending. It refers to the act of providing collateral that has a value significantly higher than the loan amount being sought. This excess collateral serves as a buffer to protect the lender against potential losses.
In DeFi, overcollateralization is a fundamental mechanism for enabling lending and borrowing without traditional credit checks
In traditional finance, overcollateralization might be required for loans involving assets with volatile market values or