Security Interest

A security interest is a legal or programmatic claim on a specific asset that provides the holder with the right to seize and sell that asset if a borrower defaults on their obligations. In the context of smart contracts, this interest is established by locking assets into a vault or contract that the lender can access under specific conditions.

This provides a level of protection for lenders, as they are not reliant on the borrower's creditworthiness but rather on the value of the collateral itself. Security interests are the bedrock of secured lending in DeFi.

They enable the creation of trustless credit markets where participants do not need to know or trust each other. The effectiveness of a security interest depends on the protocol's ability to enforce the claim and liquidate the asset in a timely manner.