A collateralized asset has another, or multiple other assets, backing and securing its value.

This means that the borrower puts up some form of assets, such as cryptocurrency or stablecoins, as security for the loan. If the borrower fails to repay the loan, the lender can seize the collateral to recoup their losses. This helps to reduce the risk of default on the part of the borrower, and it allows lenders to offer loans with lower interest rates.

Collateralization can provide both borrowers and lenders with greater security and confidence in the DeFi lending process.

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