# Supported Collateral

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All money markets must decide what types of collateral to support from their inception. This decision will inform most future design choices, from risk parameters and liquidations, to the protocol’s target audience.

The type of collateral that Nero is going to support falls within very specific constraints:

### Decentralised <a href="#c03a" id="c03a"></a>

If there are any lessons to be learned from this cycle it’s that there is no line regulators won’t cross. Circle was strong-armed by the OFAC into blacklisting USDC in the Tornado contracts. If it were to do the same to Maker, it would cease to exist due to its reliance on USDC.

Thus, to avoid existential threats, all collateral must be fully decentralised and immutable. If it can be censored, it is not decentralised.

### Short-tail <a href="#id-040f" id="id-040f"></a>

Nero is an hyperstructure. In order to be as resilient as possible, it must minimise risk, and while Nero will eventually be able to automagically derive optimal per-asset risk parameters, short-tail assets decrease the likelihood of the protocol accruing bad debt, increasing confidence in its synthetic assets. For this reason, all assets must be deeply liquid. This property is also correlated with maturity.

Within these two characteristics, supported collateral can be:

#### 1. ERC-20 Tokens <a href="#id-956a" id="id-956a"></a>

A normal token. This is the current status quo. A normal ERC-20 token. This can be WBTC, ETH, LINK, LUSD, and so on.

#### 2. Yield-bearing Tokens <a href="#c5af" id="c5af"></a>


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