An under-collateralized pool refers to a financial structure where borrowers can access loans or liquidity with collateral that is less than the value of the borrowed assets. In traditional lending, borrowers typically provide collateral that exceeds the loan amount to mitigate risk for the lender. However, in this model, the collateral may only partially cover the loan.This approach allows borrowers to access funds more easily, often leading to increased participation in lending and borrowing activities. However, it also introduces higher risks for lenders, as there may be insufficient collateral to cover potential losses if a borrower defaults.To manage these risks, under-collateralized pools often implement mechanisms such as credit scoring, risk assessment, or over-collateralization by qualified borrowers. These measures help protect lenders’ interests while still providing a more flexible borrowing option.This structure has gained popularity in decentralized finance (DeFi) platforms, where users seek innovative ways to leverage their assets while maintaining liquidity.