CDP Mechanism

A Collateralized Debt Position (CDP) is your personal vault in the v1ta protocol. This guide explains how CDPs work and how to manage them well.

What is a CDP?

A CDP is a smart contract account that holds:

1. Your collateral (SOL or LSTs)
2. Your debt (VUSD you've borrowed)
3. Position metadata (owner, status, etc.)

One CDP per wallet address. All your activity is managed through a single position.

CDP Lifecycle

1. Opening a Position

To open a CDP, you must:

• Deposit collateral (SOL)
• Borrow at least 1 VUSD
• Maintain CR at or above 110%

Formula:

Max Borrowable = (Collateral Value USD / 1.105) minus 0.5% fee

The 1.105 ensures you start with over 110% CR after the 0.5% borrow fee.

Example:

Collateral: 10 SOL @ $100/SOL = $1,000
Max Borrowable: $1,000 / 1.105 = $904.98
After 0.5% fee: $904.98 minus ($904.98 × 0.005) = $900.46
Initial CR: ($1,000 / $900.46) × 100 = 111.1%

2. Active State

While your position is active, you can:

• Add collateral: Improve your CR
• Remove collateral: Lower your CR (must stay at or above 110%)
• Borrow more: Increase debt (must maintain at least 110% CR)
• Repay debt: Reduce debt and improve CR

Your position must always maintain:

• CR at least 110%
• Debt at least 1 VUSD (unless closing completely)

3. Position Adjustments

You can adjust your position with four operations:

Add Collateral

// Add 5 SOL to your position
await adjustPosition({
  collateralChange: 5 * LAMPORTS_PER_SOL,
  isCollateralIncrease: true,
  debtChange: 0,
  isDebtIncrease: false,
});

Effects:

• Increases collateral
• Improves CR
• No fees

Remove Collateral

// Remove 2 SOL from your position
await adjustPosition({
  collateralChange: 2 * LAMPORTS_PER_SOL,
  isCollateralIncrease: false,
  debtChange: 0,
  isDebtIncrease: false,
});

Effects:

• Decreases collateral
• Lowers CR
• Must maintain CR at or above 110%

Borrow More

// Borrow 100 more VUSD
await adjustPosition({
  collateralChange: 0,
  isCollateralIncrease: false,
  debtChange: 100 * 1e6, // VUSD has 6 decimals
  isDebtIncrease: true,
});

Effects:

• Increases debt
• Lowers CR
• 0.5% borrow fee applied
• Must maintain CR at or above 110%

Repay Debt

// Repay 50 VUSD
await adjustPosition({
  collateralChange: 0,
  isCollateralIncrease: false,
  debtChange: 50 * 1e6,
  isDebtIncrease: false,
});

Effects:

• Decreases debt
• Improves CR
• No fees
• Burns VUSD from your wallet

4. Closing a Position

To close your position:

1. Repay all debt (burns VUSD from your wallet)
2. Receive all collateral back
3. Position marked as "Closed"

await closePosition();

5. Liquidation

If CR falls below 110%, anyone can liquidate your position:

1. Entire debt repaid from Stability Pool
2. All collateral transferred to Stability Pool depositors
3. 5% liquidation penalty applied
4. Position marked as "Liquidated"

See Liquidations for details.

Collateral Ratio Management

Calculating Your CR

CR = (Collateral Value USD / Debt VUSD) × 100%

Example:

• Collateral: 10 SOL @ $100 = $1,000
• Debt: 800 VUSD
• CR = ($1,000 / $800) × 100 = 125%

CR Health Ranges

Factors Affecting CR

Your CR changes when:

1. SOL price moves

   • Price drops, CR decreases
   • Price rises, CR increases

2. You adjust your position

   • Add collateral, CR increases
   • Remove collateral, CR decreases
   • Borrow more, CR decreases
   • Repay debt, CR increases

3. Redemptions (rare)

   • Your debt may be partially redeemed
   • Both debt and collateral decrease proportionally
   • CR remains roughly the same

Best Practices

1. Maintain a Buffer

Recommended minimums:

• Conservative: 150%+ CR
• Moderate: 130 to 150% CR
• Aggressive: 120 to 130% CR

2. Monitor Price Movements

SOL price affects your CR directly:

New CR = Old CR × (New Price / Old Price)

Example:

• Current: 10 SOL @ $100, 800 VUSD debt, CR = 125%
• SOL drops to $90
• New CR = 125% × ($90 / $100) = 112.5%

A 10% price drop equals a 10% CR drop.

3. Plan for Volatility

During high volatility:

• Keep CR higher (150%+)
• Have VUSD ready to repay if needed
• Set up price alerts
• Monitor your position multiple times per day

4. Understand the Borrow Fee

Every time you borrow (or borrow more), a 0.5% fee is added to your debt:

Actual Debt = Borrowed Amount × 1.005

Example:

• You borrow 1000 VUSD
• Fee: 1000 × 0.005 = 5 VUSD
• Total debt: 1005 VUSD

5. Redemption Risk

CDPs with the lowest CR are first in line for redemptions:

• Not a liquidation (you keep most value)
• But your position size decreases
• Keep CR higher to avoid redemptions

Advanced Strategies

Leverage Trading

1. Deposit SOL collateral
2. Borrow maximum VUSD
3. Swap VUSD for more SOL
4. Deposit new SOL as collateral
5. Repeat (carefully!)

Risk: If SOL price drops, you can get liquidated quickly.

Yield Farming with Leverage

1. Open a CDP with LST collateral (jitoSOL, mSOL)
2. Borrow VUSD
3. Use VUSD in other DeFi protocols
4. Earn yield on both LST staking and VUSD deployment

Benefits:

• Earn staking yield on collateral
• Earn yield on borrowed VUSD
• Stay capital efficient

Stability Pool + CDP Combo

1. Open a CDP and borrow VUSD
2. Deposit some VUSD in Stability Pool
3. Earn liquidation rewards
4. Use rewards to repay debt or add collateral

Technical Details

Position Account Structure

pub struct Position {
    pub owner: Pubkey,           // Position owner
    pub collateral: u64,         // Lamports of SOL
    pub debt: u64,               // VUSD with 6 decimals
    pub status: PositionStatus,  // Active, Closed, Liquidated
    pub bump: u8,                // PDA bump seed
}

PDA Derivation

Each position is a Program Derived Address:

PDA = find_program_address(
    seeds: ["position", user_pubkey],
    program_id: V1TA_PROGRAM_ID
)

Precision

• Collateral: u64 lamports (9 decimals)
• Debt: u64 with 6 decimals
• CR Calculation: Scaled to prevent overflow

// Internal CR calculation (basis points)
fn collateral_ratio(&self, price: u64) -> u64 {
    let collateral_value = self.collateral * price / 1e9;
    let debt_value = self.debt;
    (collateral_value * 10000) / debt_value
}

Common Scenarios

Scenario 1: Price Drop Recovery

Situation: SOL drops 15%, your CR falls from 140% to 119%.

Options:

1. Add collateral: Deposit more SOL to boost CR
2. Repay debt: Burn VUSD to reduce debt
3. Do nothing: If 119% is acceptable risk
4. Close position: Repay all debt and withdraw

Scenario 2: Taking Profits

Situation: SOL price doubled, your CR is now 280%.

Options:

1. Borrow more: Take advantage of higher collateral value
2. Remove collateral: Take some SOL off the table
3. Maintain: Keep high CR for safety
4. Close: Exit position entirely

Scenario 3: Approaching Liquidation

Situation: SOL drops, your CR is at 112%.

Immediate actions:

1. Add collateral (fastest)
2. Repay some debt
3. Both (most effective)

Comparison: CDP vs Traditional Lending

FAQ

Can I have multiple CDPs?

No, one CDP per wallet address. But you can manage everything through that one position.

What happens if I get liquidated?

Your position is closed, debt is repaid from Stability Pool, and collateral goes to SP depositors. You lose the 5% liquidation penalty but keep any remaining value.

Can I transfer my CDP to another wallet?

No, CDPs are bound to the wallet that created them.

How often should I check my CR?

• During normal markets: Once per day
• During volatile markets: Multiple times per day
• Set up automated alerts for CR thresholds

What's better: high CR or high utilization?

High CR (low utilization):

• Safer
• Less liquidation risk
• Less capital efficient

High utilization (low CR):

• Riskier
• More capital efficient
• Requires active management

Choose based on your risk tolerance and time commitment.

Next Steps