Collateral

Something of enormous value used by a borrower to guarantee repayment of a loan to the lender.

Collateral is a term used to describe something— an asset, that a borrower uses as a pledge for securing a loan. This is a requirement for anyone who wants to borrow if he wants his loan request to be granted. Failure to repay the loan after the stipulated date will lead to the loss of the asset used as collateral.

Ether (ETH) and Bitcoin (BTC) are examples of usable collateral in cryptocurrency. The borrower can obtain the payment of his loan without having to sell his crypto— all thanks to crypto loaning platforms.