What Are CDPs in Crypto? 𧩠| Binance Square
CDPs, or Collateralized Debt Positions, are a crypto mechanism that lets users borrow or mint assets by locking cryptocurrency as collateral instead of selling it.
đč Core idea
Users lock assets like BTC, ETH, or other tokens as collateral and receive a loan or newly issued asset in return.
đč Risk management through collateral
CDPs are usually overcollateralized, meaning the value of locked assets must stay higher than the borrowed amount. If it drops too much, liquidation can occur.
đč Beyond DeFi platforms
While popular in DeFi, CDPs are a broader crypto concept used in stablecoin systems, lending protocols, and synthetic asset platforms.
đč On-chain and transparent
CDPs operate via smart contracts, making positions auditable, automated, and free from traditional intermediaries.
đ In short, CDPs allow users to access liquidity while keeping exposure to their crypto, making them a key building block in modern crypto finance.
