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Digital credit is simply lending stablecoins against collateral on the blockchain. Borrowers put up more collateral than they borrow, and interest is paid to lenders. More on overcollateralisation below. It works like a secured money-market loan, but instead of banks or custodians, everything happens through transparent, automated code - via the aforementioned smart contracts - which eliminates the counterparty risk of working with traditional institutions. Smart contracts continue operating even in case of a bankruptcy of their parent organisation.
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