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The collateral is held in a smart contract -- if the borrower disappears and fails to make a repayment, his collateral becomes eligible for seizure.

• iMuzz 8y ago
  Are the collaterals always worth equal or more than the amount borrowed? I asked that assuming people put up 1 eth as collateral to borrow 2 eth.
  • cortesoft 8y ago
    Usually collateral is supposed to be equal or more than the amount borrowed, especially in a situation like this where there is no 'credit score' to use to determine likelihood of default.
    • ghthor 8y ago
      The protocol doesn't have a credit score. That's a concept better suited for the application layer built on top.
      • cortesoft 8y ago
        Right, which was why my point was that the collateral is probably going to be at least equal in value to whatever is borrowed.
        • bpforster24 8y ago
          Dharma Protocol doesn't require that the value of collateral be greater than the principal of the loan, but we do expect the market will demand full- or over-collateralization.