The practice of requiring a borrower to pledge more asset value than the actual loan amount.
The practice of requiring a borrower to pledge more asset value than the actual loan amount. To maintain system integrity and offer fixed 10% APRs, Lygos Finance requires overcollateralization, safely locking the Bitcoin in a non-custodial DLC to protect both borrower and lender.
In decentralized and traditional lending, overcollateralization mitigates default risk for the lender. If a borrower wants a $100,000 loan, they might need to deposit $150,000 worth of Bitcoin. If the value of the collateral drops dramatically, the lender can liquidate the asset to recover the loan principal before facing a financial loss.
To maintain system integrity and offer fixed 10% APRs, Lygos Finance requires overcollateralization, safely locking the Bitcoin in a non-custodial DLC to protect both borrower and lender.
Understanding Overcollateralization is critical when comparing loan offers. This concept directly affects how much you pay, how much collateral you need, or what happens if market conditions change during your loan.
Starting at 10% APR, $0 origination fees, and DLC-secured collateral on the Bitcoin blockchain.