What Is a CDP (Collateralized Debt Position)?
A CDP is a smart contract mechanism popularized by MakerDAO that lets you lock up cryptocurrency as collateral and mint a stablecoin (like DAI) against it. The stablecoin represents debt — you must repay it (plus a stability fee) to reclaim your collateral. If your collateral falls below a minimum ratio, the contract liquidates it to cover the debt.
Think of it as a crypto-native mortgage: your house (ZEC) backs a loan (DAI/USD), and you keep ownership as long as you service the debt.
How WZEC CDPs Work Today
Wrapped ZEC (WZEC) can technically be added as collateral on MakerDAO-style platforms if governance approves the asset. The process would be:
- Bridge ZEC → WZEC on Ethereum
- Deposit WZEC into a CDP vault
- Mint DAI against the collateral (e.g., 50% LTV)
- Use DAI for expenses, yield farming, or further DeFi
- Repay DAI + stability fee to reclaim WZEC
- Bridge WZEC back to ZEC and re-shield
Risk Profile of ZEC CDPs
| Risk Type | Description | Mitigation |
|---|---|---|
| Liquidation risk | ZEC price drops trigger forced sell | Maintain high collateral ratio (150%+) |
| Stability fee | Interest charged on minted stablecoins | Calculate break-even vs ZEC appreciation |
| Smart contract risk | Protocol vulnerabilities | Use only audited, established platforms |
| Bridge risk | WZEC bridge compromise | Bridge only amounts needed |
| ZEC volatility | High price volatility vs. stable pairs | Maintain 200%+ collateral ratio for safety |
The Future: Native ZEC Stablecoin
With Zcash Shielded Assets (ZSAs) in development, a native ZEC-backed stablecoin becomes conceivable — one that operates entirely within the shielded pool. You could lock shielded ZEC as collateral and receive a shielded stablecoin, all without public on-chain visibility. The lending terms, collateral amount, and debt level would all be private.
This represents a fundamentally different privacy model than Ethereum-based CDP systems: not only is the collateral private, but the debt itself is private — visible only to the debtor and whoever they choose to share their viewing key with.
Is This Available Today?
Native ZEC-backed stablecoins in the shielded pool are not yet available. The closest current options are using WZEC on Ethereum in existing CDP protocols, or using centralized lending services that accept ZEC collateral. Check our ZEC collateral borrowing guide for current options.