Overcollateralization
Also called: collateral ratio, overcollateralised loan
Overcollateralisation requires borrowers to post more value than they take out — often 150% or more — because the protocol has no way to pursue a defaulter. It's what makes trustless lending possible and what limits its usefulness. It also underpins crypto-backed stablecoins, where the buffer absorbs collateral price falls before the peg is threatened.