Formal agreements specifying the terms under which funds are borrowed and repaid, including interest rates, repayment schedules, and any collateral requirements.
Mechanism
These arrangements structure financial obligations between lenders and borrowers, ranging from simple loans to complex securitized debt. In decentralized finance, they often involve collateralized lending protocols managed by immutable smart contracts.
Methodology
Decentralized finance (DeFi) platforms automate debt creation and management through smart contracts, enabling transparent and immutable lending markets without traditional financial intermediaries, utilizing cryptographic assets as collateral and defining clear liquidation parameters.
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