Collateralized Debt Position (CDP)
A smart contract structure where borrowers lock collateral to mint digital assets as a loan.
What is Collateralized Debt Position (CDP)?
CDPs, popularized by MakerDAO, allow users to lock collateral (e.g., ETH) in a smart contract to mint a protocol-native asset like DAI, which acts as a loan. For example, depositing $1,500 ETH at a 66.7% LTV might mint $1,000 DAI. If collateral value drops below the liquidation threshold, the CDP is liquidated to repay the debt.
In 2025, CDPs support multi-collateral assets, including real-world assets like tokenized bonds. MakerDAO’s CDP system managed over $8 billion in TVL in 2024, per Dune Analytics, driving stablecoin adoption while maintaining overcollateralization for stability.
Related Terms
Proof-of-Stake (PoS) Ethereum
A consensus mechanism used by Ethereum to secure its network and validate transactions.
mNAV
Multiple of Net Asset Value - a valuation metric for digital asset treasury companies, representing the ratio of enterprise value to digital asset holdings value.
Machine-to-Machine Transactions
Automated digital asset exchanges between systems without human intervention.
Thick Market/Thin Market
A thick market has many participants trading high volumes, ensuring robust information aggregation; a thin market has few participants and low volumes, risking inaccurate predictions.
Liquidation (Lending)
The automated sale of a borrower’s collateral when its value falls below a protocol’s required threshold.
Optimistic Rollup
An Optimistic Rollup is a layer-2 scaling solution for Ethereum that processes transactions off-chain, assumes they are valid, and posts compressed data to the main chain, relying on fraud proofs to ensure correctness.