> For the complete documentation index, see [llms.txt](https://docs.drunkencats.xyz/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.drunkencats.xyz/product/cdp-and-dcusd.md). # CDP and dcUSD ## Overview DrunkenCats introduces a native collateralized debt system built around **zkLTC** and **dcUSD**. Users can lock **zkLTC** as collateral and mint **dcUSD**, the protocol’s decentralized stable asset. The system is designed to provide: * On-chain liquidity without selling long-term holdings * A transparent overcollateralized borrowing model * Native stable liquidity for the LitVM ecosystem * Capital efficiency for users participating in DeFi dcUSD is designed to maintain a soft peg around **1 USD** through collateralization, liquidation incentives and protocol-controlled risk parameters. *** ### Collateral: zkLTC At launch, the CDP system uses a single collateral asset. Using one collateral asset during the early stage keeps the system: * Easy to understand * Easier to monitor * More predictable * Safer to manage during protocol growth Additional collateral assets may be considered later as the ecosystem matures. *** ### Minting dcUSD Users may open a CDP vault by depositing zkLTC as collateral. After depositing collateral, users can mint dcUSD against their position. Example: * Deposit **10 zkLTC** * Maintain required collateral ratio * Mint dcUSD * Use dcUSD across the ecosystem while keeping zkLTC exposure This allows users to access liquidity without selling their collateral. *** ### Collateral Ratio The system uses an overcollateralized model. Minimum collateral ratio: **120%** This means every position must maintain collateral value above the required threshold. Example: * Collateral value: **$120** * Maximum dcUSD minted: **$100** Maintaining a healthy collateral ratio helps support dcUSD stability and protects the protocol. *** ### Liquidation If collateral value drops below the minimum threshold, the position may become eligible for liquidation. Liquidation helps: * Protect dcUSD solvency * Maintain system stability * Keep the stable asset properly collateralized Liquidators may repay debt and receive collateral with a liquidation incentive. Liquidation incentive: **5%** Example: * Vault falls below required ratio * Liquidator repays dcUSD debt * Liquidator receives zkLTC plus incentive *** ### dcUSD Utility dcUSD is intended to become a core liquidity asset across the DrunkenCats ecosystem. Planned utility includes: * Trading pairs on DrunkenCats DEX * Liquidity pools * Ecosystem incentives * DeFi integrations * Treasury and protocol liquidity The long-term goal is to create reliable decentralized dollar liquidity directly inside the LitVM ecosystem. *** ### Risk Notice CDP positions are affected by market conditions. Users should understand: * zkLTC price volatility * Liquidation thresholds * Debt management * Peg dynamics Borrow responsibly and monitor vault health regularly. --- # Agent Instructions This documentation is published with GitBook. GitBook is the documentation platform designed so that both humans and AI agents can read, navigate, and reason over technical content effectively. Learn more at gitbook.com. ## Querying This Documentation If you need additional information that is not directly available in this page, you can query the documentation dynamically by asking a question. Perform an HTTP GET request on the current page URL with the `ask` query parameter, and the optional `goal` query parameter: ``` GET https://docs.drunkencats.xyz/product/cdp-and-dcusd.md?ask=&goal= ``` `ask` is the immediate question: it should be specific, self-contained, and written in natural language. `goal` is optional and describes the broader end goal you are ultimately trying to accomplish on behalf of the user. GitBook uses it to tailor the answer towards what is most useful for that goal. The response will contain a direct answer to the question and relevant excerpts and sources from the documentation. Use this mechanism when the answer is not explicitly present in the current page, you need clarification or additional context, or you want to retrieve related documentation sections.