🔒Collateral Debt Position (CDP)

What is a CDP?

Overview

At EquitX, every xStock is supported by collateral secured in a Collateralized Debt Position (CDP). Users create a CDP by depositing collateral into EquitX to mint new xStocks. This action borrows against the collateral, establishing a debt. The platform continuously monitors these CDPs to ensure they remain sufficiently collateralized, safeguarding against market fluctuations.

Interacting with a CDP

As the owner of a CDP, you have several options to manage your investment:

• Deposit Collateral: Increase your collateral to boost your collateral ratio, reducing the risk of your CDP being liquidated due to market downturns.

• Withdraw Collateral: You can choose to withdraw some of your collateral; however, this reduces your collateral ratio and increases the risk of liquidation.

• Mint xStock: Minting additional xStocks decreases your collateral ratio, potentially elevating the liquidation risk.

• Burn xStock: Burning xStocks raises your collateral ratio. If you burn all the xStocks associated with the CDP, the CDP closes, and your full collateral is returned to you.

Fees Associated with a CDP

Operating a CDP on EquitX involves certain fees to support the ecosystem's health and functionality. A 2% fee applies when withdrawing collateral or closing a CDP. This fee contributes to the stability of the platform and is redistributed as rewards within the EquitX community. As with other protocol parameters, this fee rate is subject to adjustments based on community governance decisions.

CDP Liquid Staking

Overview

EquitX introduces liquid staking, allowing users to earn returns on their collateral while it's locked in CDPs. This feature integrates seamlessly with the Stellar network, enabling your collateral to accrue rewards as per the associated stake pool's performance.

Stake Pool Changes

Should you decide to switch to a different stake pool, the XLM collateral in your CDP will automatically begin earning rewards from your newly selected pool, ensuring continuous reward accrual without any manual adjustments needed.