What Is a “Collateralized Debt Position” (CDP) in Decentralized Finance?
A Collateralized Debt Position (CDP) is a smart contract that allows a user to lock up a volatile cryptocurrency (collateral) and, in return, mint or borrow a decentralized stablecoin. The value of the collateral must exceed the value of the stablecoin borrowed (over-collateralization).
The CDP functions as a self-service loan where the user creates debt in the form of the stablecoin. To reclaim their collateral, the user must repay the stablecoin plus any accrued interest or stability fees.
Glossar
Cdp
Framework ⎊ Collateralized Debt Positions (CDPs) represent a core mechanism within decentralized finance (DeFi), specifically serving as the foundation for over-collateralized lending protocols.
Cdp System
Architecture ⎊ The CDP System represents a foundational decentralized finance architecture designed to issue a stable, collateral-backed digital currency.
Collateralized Debt Position (CDP)
Mechanism ⎊ A Collateralized Debt Position (CDP) serves as a fundamental mechanism within decentralized finance protocols, enabling users to generate stablecoins by locking up volatile cryptocurrency assets as collateral.
Debt
Liability ⎊ The concept of debt within cryptocurrency, options trading, and financial derivatives fundamentally represents a legal or contractual obligation to transfer assets or provide services to another party.