# Overcollateralization

*Crypto & Digital Assets — Finicade finance glossary*

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.

**Also known as:** collateral ratio, overcollateralised loan

**Related terms:** [Lending Protocol](https://finicade.com/glossary/lending-protocol), [Liquidation](https://finicade.com/glossary/liquidation), [DeFi](https://finicade.com/glossary/defi), [Collateral](https://finicade.com/glossary/collateral), [Stablecoin](https://finicade.com/glossary/stablecoin)

Source: https://finicade.com/glossary/overcollateralization