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Glossary · O
Overcollateralisation
The requirement that the value of collateral deposited exceeds the value of the loan taken. DeFi lending protocols require overcollateralisation (typically 110–175%) to protect lenders in case of rapid collateral price declines. A borrower depositing $1,500 of ETH to borrow $1,000 of USDC has a 150% collateral ratio.
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