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  2. /Glossary
  3. /Undercollateralized Lending
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defi

Undercollateralized Lending

DeFi lending where borrowers put up less collateral than they borrow, similar to traditional unsecured loans.

Definition

DeFi lending where borrowers put up less collateral than they borrow, similar to traditional unsecured loans. It requires trust, reputation, or credit scores, which are hard to do in crypto's pseudonymous environment. Maple Finance and TrueFi have built protocols for this, mostly serving institutional borrowers.

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Related Terms

Overcollateralization

Requiring borrowers to deposit more collateral than the amount they're borrowing.

Lending Protocol

A DeFi application that lets you lend your crypto to earn interest or borrow against your holdings.

DeFi (Decentralized Finance)

Financial services built on blockchain without traditional intermediaries.

1inch

A DEX aggregator that splits trades across multiple decentralized exchanges to find the best overall price.

Aave

One of the biggest lending and borrowing protocols in DeFi.

Across Protocol

A cross-chain bridge that uses an optimistic verification system and a network of relayers to move tokens between chains quickly.

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