On-Chain Collateral Could Unlock Better Loan Terms, Says Crypto Bank Executive

A crypto bank executive suggests that using on-chain collateral could unlock more advantageous loan terms in the decentralized finance (DeFi) space. Instead of relying on traditional risk assessment methods, lenders can now analyze on-chain data to evaluate a borrower’s creditworthiness. This could involve assessing transaction history, wallet size, and protocol activity. This increased transparency reduces the need for intermediaries and enhances efficiency in the lending process. However, borrowers should be mindful of the risks associated with cryptocurrency price volatility, as a decline in collateral value could lead to liquidation. Furthermore, proper security measures are essential to protect digital collateral from potential hacks and cyberattacks. As the DeFi landscape continues to evolve, utilizing on-chain collateral represents a promising step towards democratizing access to credit.