Collateralized lending involves borrowing funds while securing the loan with cryptocurrency as collateral. It allows individuals to access capital without selling their assets, providing liquidity while retaining ownership of their digital currencies.In this process, the borrower deposits a specified amount of cryptocurrency into a smart contract or lending platform. This collateral acts as security for the loan. If the borrower fails to repay, the lender can seize the collateral to recover the loaned amount.Interest rates and terms can vary significantly among platforms. Borrowers typically receive a loan valued at a fraction of their collateral’s worth, often to mitigate the lender’s risk. This means that higher collateral is usually required for larger loans.Additionally, price volatility in the cryptocurrency market can affect loan agreements. If the value of the collateral falls below a certain threshold, the lender may require additional collateral or liquidate part of the holdings to maintain the loan’s security.Collateralized lending offers a flexible financing option for crypto holders, enabling them to leverage their assets without needing to liquidate them.