# Collateral

> An asset you lock up to back a loan. If the loan is not repaid, the collateral can be taken.

Canonical URL: https://fudfomo.co/glossary/collateral
Source: What The Block! Dictionary v1.0 (last updated 2026-04-25), browsable at https://wtb.fudfomo.co.

## Definition

Collateral is something you pledge to a lender as security. In crypto, it is usually another token, like ETH or a stablecoin, locked into a smart contract or held by an exchange.

If the value of the collateral falls or you fail to repay, the protocol can seize and sell it to make the lender whole. Most DeFi loans are over-collateralised, meaning you have to lock up more value than you borrow.

## Related terms

- [DeFi](https://fudfomo.co/glossary/defi): Decentralised finance. Apps that offer lending, trading, and saving on a blockchain instead of through a bank.
- [Lending Protocol](https://fudfomo.co/glossary/lending-protocol): A DeFi app that lets users deposit crypto to earn interest and others borrow against collateral.
- [Liquidation](https://fudfomo.co/glossary/liquidation): When a borrower's collateral is sold off automatically because their loan has fallen below the safety threshold.
- [Stablecoin](https://fudfomo.co/glossary/stablecoin): A token designed to hold the same value as a regular currency, usually the US dollar.

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