Clear DefinitionsBridged Collateral
1 min read
Pronunciation
[brijd kawl-a-turl]
Analogy
Like leaving your house deeds in a trust before getting a home equity loan in another country.
Definition
Collateral assets locked on an origin chain that back the issuance of corresponding tokens on a destination chain. It secures cross‑chain borrowing or leveraged positions.
Key Points Intro
Bridged collateral enables DeFi primitives across chains by ensuring value backing.
Key Points
Lock‑mint model: Locks native asset, mints equivalent on target chain.
Collateral ratio: Defines over‑collateralization requirements.
Liquidation: Triggered on target chain and relayed back to origin.
Cross‑chain oracle: Feeds price data for health checks.
Example
A user locks 1 BTC on Bitcoin’s chain via a bridge and receives 1 WBTC on Ethereum to use as collateral in lending protocols.
Technical Deep Dive
Bridge escrow contract calls `lock(user, amount)` and off‑chain relayer issues `mintWrapped` on Ethereum. Health factor checks use oracles via Chainlink; liquidation calls `redeem()` on origin chain.
Security Warning
Oracle failures or bridge hacks can leave collateral under‑ or over‑valued, risking unfair liquidations.
Caveat
Bridged collateral inherits risks of both chains; monitor both networks’ health.
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