Collateralized Debt Position (CDP) Cards vs Pre-Funded Cards

Unmatched leverage: Access up to 90% of your crypto's value as spending power without selling. This matters for yield maximization, allowing you to spend while maintaining exposure to asset appreciation and staking rewards.

Liquidation risk: Requires active management of collateral ratios. A 15% price drop can trigger liquidation. This matters for volatile market conditions, demanding monitoring tools like DeFi Saver or automated keepers.

Choose CDP for: High-net-worth individuals, DAO treasuries, and protocols (e.g., using Aave or MakerDAO vaults) who need to unlock liquidity from large, appreciating portfolios for operational expenses or strategic investments.

No debt, no liquidation: You spend only what you pre-fund. This matters for budgeting and compliance, providing a predictable, self-custodied alternative to traditional prepaid cards with clear audit trails.

Reduced leverage: Requires locking the full spending amount upfront. This matters for capital allocation, as funds are idle until spent, missing potential DeFi yield opportunities on that specific capital.

Choose Pre-Funded for: Payroll, corporate expenses, and new users onboarding from fiat (via bridges like Circle's CCTP). Acts as a seamless Web2-to-Web3 spending rail with no credit risk, similar to using a debit card.

Dynamic collateralization: Users lock assets (e.g., ETH, wBTC) to mint cards, freeing up ~70-90% of capital versus pre-funding. This matters for treasury management and high-value institutional users who need to maintain yield-bearing positions.

Generates protocol fees from stability fees and liquidation penalties. Enables native DeFi composability—minted cards can be used as collateral in lending protocols like Aave or as liquidity in DEX pools. This matters for protocols building an ecosystem and seeking sustainable revenue.

No liquidation risk: Users pre-deposit stablecoins (USDC, DAI) equal to the card's limit. This eliminates the complexity of collateral ratios, price feeds, and health factors. This matters for mass adoption, retail users, and enterprises with strict compliance needs who cannot tolerate balance volatility.

Deterministic, low fees: Costs are typically a flat issuance fee (~$1-5) with no ongoing interest. Cards are issued instantly without waiting for blockchain confirmations of collateral locking. This matters for high-frequency use cases like pay-per-use APIs or checkout flows where latency and cost predictability are critical.

Unlocked Liquidity: Users can spend a portion of their staked assets (e.g., ETH, stETH) as credit without selling, preserving upside exposure. This matters for long-term holders and DeFi power users who want to leverage their existing portfolio for payments or yield farming.

Volatility Exposure: A market downturn can trigger automatic liquidations of the underlying collateral to repay the debt. This matters for merchants accepting payments or users in volatile regions who cannot tolerate the risk of a payment method suddenly becoming insolvent due to price swings.

Zero Settlement Risk: Funds are pre-deposited and spendable immediately, functioning like a traditional debit card. This matters for enterprise payroll, B2B vendor payments, and regulatory-compliant operations where transaction finality and lack of credit risk are non-negotiable.

No Debt Management: Users only spend what they have, eliminating the complexity of monitoring collateral ratios, health factors, or interest rates. This matters for mainstream adoption, first-time crypto users, and businesses seeking a predictable, straightforward expense management tool.

Idle Capital: Locked funds cannot be simultaneously deployed in DeFi for yield (e.g., lending on Aave, providing liquidity on Uniswap V3). This matters for capital-conscious institutions and sophisticated users who optimize for total return and view idle balances as a significant cost.