The lender would have full control of the bitcoin locked in the 2 of 2 multisig since they would be the one given the bitcoin in the commitment transaction. So there shouldn't be any need for additional collateral.
Login to reply
Replies (2)
You said 1 of 2 in your original proposition?
I meant 2 of 2, so I edited it. They locknthe bitcion in a 2 of 2 multisig. But it is like lightning where they both sign an unbroadcasted commitment transaction allowing either of them reclaim the bitcoin, but have it time locked for the borrower until after the loan term. At any time the lender can claim the bitcoin without a timelock because the borrower signed a commitment transaction handing giving the bitcoin to them without a timelock.