A collateralized debt position or CDP is held by locking collateral in smart contracts to generate stablecoins.
MakerDAO was the first project that introduced CDPs. The CDP is created by users when they lock up their collateral in a MakerDAP smart contract to generate DAO – the stablecoin.
In MakerDAO’s case the CDP is usually overcollateralized by 150% to account for volatility.
When a user wants to pay back their loan, they need to pay back the DAi and the generated stability fees.
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