Glossary · Stablecoins
CDP stablecoin
Also: collateralized debt position, overcollateralized stablecoin
A CDP stablecoin is a token minted as a loan against crypto collateral worth more than the amount issued, with the surplus collateral and a liquidation mechanism standing in for an issuer's cash reserves.
Related terms
- Collateral
- Collateral is the asset a borrower locks in a lending protocol to secure a loan, seizable by liquidators at a discount if the loan's value rises too far against it.
- Liquidation
- Liquidation is the process in which a third party repays part of an undercollateralized borrower's debt and receives their collateral at a discount, closing the shortfall before the protocol takes a loss.
- Stablecoin
- A stablecoin is a token designed to hold a constant value against a reference asset, almost always the US dollar, using reserves, overcollateralization or a hedged trading position to defend the peg.
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