Overcollateralized

A loan backed by collateral worth more than the amount borrowed — the standard model for DeFi lending (e.g. post $150 of ETH to borrow $100 of stablecoin). The collateral sits in the smart contract and is auto-liquidated if its value falls too far, protecting the protocol from loss without trusting the borrower's creditworthiness. This design is why major DeFi lenders survived the 2022 CeFi lending collapses.