# Collateral Debt Positions ⎊ Area ⎊ Resource 3

---

## What is the Collateral of Collateral Debt Positions?

Collateral Debt Positions require users to deposit digital assets as security to mint or borrow a new asset. The value of the deposited collateral must exceed the value of the borrowed asset by a specific ratio, ensuring overcollateralization to absorb market volatility. This mechanism underpins the stability of many decentralized stablecoins by providing a buffer against price fluctuations.

## What is the Debt of Collateral Debt Positions?

The core function of a CDP is to create a debt obligation for the user, represented by the newly generated asset. Repaying this debt, along with any accrued interest or stability fees, allows the user to retrieve their original collateral. The debt position remains open until the user closes it by returning the borrowed amount.

## What is the Liquidation of Collateral Debt Positions?

To maintain system solvency, CDPs incorporate an automated liquidation mechanism. If the collateral's value drops below the minimum required collateralization ratio, the smart contract automatically liquidates the position. This process involves selling the collateral on the open market to cover the outstanding debt and prevent the system from becoming undercollateralized.


---

## [Leverage Limit](https://term.greeks.live/definition/leverage-limit/)

## [Real-Time Collateral Validation](https://term.greeks.live/term/real-time-collateral-validation/)

## [Real-Time Collateral Rebalancing](https://term.greeks.live/term/real-time-collateral-rebalancing/)

## [Cross-Chain Collateral Aggregation](https://term.greeks.live/term/cross-chain-collateral-aggregation/)

## [Zero Knowledge Proof Collateral](https://term.greeks.live/term/zero-knowledge-proof-collateral/)

## [Hybrid Collateral Model](https://term.greeks.live/term/hybrid-collateral-model/)

## [Zero-Knowledge Collateral Risk Verification](https://term.greeks.live/term/zero-knowledge-collateral-risk-verification/)

## [Collateral Ratio Calculation](https://term.greeks.live/term/collateral-ratio-calculation/)

---

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**Original URL:** https://term.greeks.live/area/collateral-debt-positions/resource/3/