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❓WHAT CDPs ARE

CDPs are smart contract-based lending systems that enable crypto borrowing through a 3-step process:

  1. Collateral Deposit: Users lock crypto assets (WETH, PENGU, etc.) into a smart contract

  2. Debt Issuance: The system calculates maximum borrowable amount based on collateral value

    (loans must be over collateralized)

  3. Position Management

    • Accrues stability fee (interest) on borrowed amount

    • Must maintain collateral ratio > X%

    • If collateral value drops below X% smart contract automatically liquidates collateral

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