# kaal:claim:3949098-001

**Claim.** Decentralized finance is structurally disadvantaged against traditional finance because decentralized products must be backed with full collateral, typically 100 percent and 200 percent on secondary layers such as MakerDAO, a collateralization burden that would be unthinkable in traditional markets.

**Type.** failure  **Support.** argued

**Holds when.**

- digital asset markets as of 2021
- decentralized loans, insurance and similar products
- absence of alternatives to collateral

**Source quote.**

> Decentralized markets are overcollateralized, giving traditional markets a fundamental advantage. To enable a decentralized financial transaction, such as a loan or insurance policy, decentralized products typically need to be backed with 100% collateral.

**From.** Wulf A. Kaal, *Reputation as Capital – How DAOs Upgrade Finance* (2021), I. Introduction, page 4

**Cite as.** Wulf A. Kaal, Reputation as Capital – How DAOs Upgrade Finance (2021). SSRN: https://ssrn.com/abstract=3949098

**Verify.** sha256 of source PDF `04297905564a6092b2db7640561f58fd374d3114c79527357bad09d11b909819` at https://raw.githubusercontent.com/wulfkaal/Academic-Papers/main/papers/pdf/Kaal%20-%202021%20-%20Reputation%20as%20Capital%20%E2%80%93%20How%20DAOs%20Upgrade%20Finance.pdf

**Failure mode.** Overcollateralization Penalty  (family: liquidity-and-market-structure-failure)

**Topics.** decentralization, defi

**Keywords.** overcollateralization, decentralized-finance, liquidity, collateral, defi-competitiveness

**Related claims.**

- restates: https://wulfkaal.github.io/claims/3782216-036

**Canonical form.** This markdown file is the canonical hashed representation of the claim. Its sha256 is the content hash used for attestation.