Collateral is an asset pledged by a borrower to a lender as security for a loan or obligation, which the lender may seize or liquidate if the borrower defaults. In decentralised finance it typically takes the form of over-collateralised crypto assets locked in a smart contract, backing loans, synthetic assets, or stablecoin pegs. The collateral-to-debt ratio determines solvency and triggers liquidation when it falls below a protocol-defined threshold.