What is a Bitcoin CDP?

By Benjamin Whitby · Published 27 October 2026 · Updated 27 October 2026

The short answer

Diamond Hands by GVNR is a Bitcoin CDP, or collateralised debt position: you lock native BTC as collateral and mint UCD, a Bitcoin-backed stablecoin, against it. Your BTC sits in its own isolated vault on Bitcoin L1, with no wrapping or bridging. A CDP mints a new stablecoin against your collateral, rather than lending you dollars other people have deposited.

Key facts

Diamond Hands is a Bitcoin CDP. You lock BTC and mint UCD against it.
Your BTC stays native on Bitcoin L1, in its own isolated vault used for your loan only.
Your BTC is never pooled with other borrowers' BTC or rehypothecated.
UCD is a Bitcoin-backed stablecoin. You can Swap it for USDC or USDT.
Loans open at a minimum collateral ratio of 150%. The maximum LTV at opening is 66%.
A 3% mint fee on the amount borrowed is added to your debt at mint, so you receive the full amount you borrow.
Each loan has a 12-month term, with no monthly payments.
If the collateral ratio falls below 110% during the term, the loan is liquidated in full. After expiry, the threshold rises.

What does CDP mean?

On Diamond Hands, the CDP is your loan: a position that holds your BTC as collateral and records the UCD you owe against it. CDP stands for collateralised debt position. The collateral is what you lock. The debt is the stablecoin you mint against it. The position is the record that ties the two together, and the protocol checks it against fixed limits, such as a minimum collateral ratio to open and a liquidation threshold.

Two numbers describe a CDP. The collateral ratio is the value of the collateral divided by the debt. LTV, or loan-to-value, is the same relationship the other way round: the debt divided by the value of the collateral. On Diamond Hands, a loan opens at a collateral ratio of at least 150% and a maximum LTV of 66%.

How does a Bitcoin CDP work on Diamond Hands?

A Diamond Hands loan runs through five steps in the app:

Deposit BTC. You send native BTC to your loan's own vault address on Bitcoin L1.
Mint UCD. You mint UCD against that BTC. The 3% mint fee is added to your debt, so you receive the full amount you borrow: borrow 100 UCD, receive 100 UCD, owe 103 UCD.
Swap. If you want dollars in another stablecoin, you can Swap UCD for USDC or USDT.
Repay UCD. You repay any amount of UCD, in part or in full. A repayment burns that UCD on Ethereum and updates your debt and collateral ratio in the same transaction.
Withdraw BTC. After a full repay, the loan stays open with zero debt, and you can Withdraw BTC after 6 Bitcoin block confirmations.

While the loan is open, you can add BTC at any time. You can withdraw part of your BTC only if the collateral ratio stays at or above 110% afterwards.

How is a CDP different from borrowing from a lending pool?

Diamond Hands mints new UCD against your own vault, so there is no pool of other people's deposits on the other side of your loan. That is the main difference between a CDP and a pooled lending market.

In a pooled market, depositors supply stablecoins and borrowers take them out against collateral. CoinMarketCap described Morpho's main Base market this way on 20 October 2026: "Depositors supply USD Coin (USDC), and borrowers take it out by locking up Coinbase Wrapped BTC (CBBTC), a token backed one-for-one by Bitcoin" (CoinMarketCap). The same report put loans in that market at a record $1.6 billion.

Pooled lending is also where the money behind many crypto loans now comes from. CoinDesk reported on 19 October 2026 that crypto lending vaults had passed $10 billion in deposits, with curators who "select lending strategies, set risk limits and collect fees", citing the Financial Times, that US and European regulators are examining oversight (CoinDesk).

What makes a Bitcoin CDP "native"?

GVNR Diamond Hands takes native BTC as collateral, on Bitcoin L1, with no wrapping or bridging. Many Bitcoin loans in DeFi use a wrapped token instead: an Ethereum token backed by BTC that is typically held by a custodian or bridge.

The Morpho market above takes cbBTC, and the Two Prime vault in the CoinDesk report accepts wrapped bitcoin. Borrowing against a wrapped token adds the custodian and the token's own contracts to the loan. With Diamond Hands, the BTC stays on Bitcoin L1 in its own vault, and the UCD you mint is on Ethereum. Diamond Hands also relies on its own smart contracts, which carry their own risk.

What are the risks?

Diamond Hands, like any CDP, can liquidate your collateral. If the collateral ratio falls below 110% during the term, the loan is liquidated in full and you lose all the BTC in the vault. Only specified liquidators can trigger it. No BTC is returned, even if the vault was worth more than the debt.

Below a 150% collateral ratio, the loan shows a warning in the app. If you have given an email address, you can also get an email. Nothing else happens to the loan at that point.

At the end of the 12-month term, you repay the loan or renew it for 12 months. Each annual renewal costs 3% of the outstanding debt, less a credit for any unused mint fee. If you do neither, the liquidation threshold starts rising from the first day after expiry.

Diamond Hands is still in Mainnet Beta, with a 100 UCD cap for now. The cap is expected to rise in the coming months.

Frequently asked questions

Is Diamond Hands a CDP?

Yes, Diamond Hands is a Bitcoin CDP. You lock native BTC in your loan's own vault and mint UCD against it.

What is the difference between a CDP and a crypto loan?

A Diamond Hands CDP is a crypto loan in which the stablecoin is minted against your collateral. In a pooled loan, you borrow stablecoins that depositors have supplied.

What stablecoin do I get from a Bitcoin CDP on Diamond Hands?

You get UCD, a Bitcoin-backed stablecoin. You can Swap UCD for USDC or USDT.

Is my BTC wrapped or bridged in a Diamond Hands CDP?

No, Diamond Hands keeps your BTC native on Bitcoin L1, with no wrapping or bridging. It sits in its own isolated vault, used for your loan only.

Is my BTC lent out or pooled?

No, Diamond Hands never pools your BTC with other borrowers' BTC or rehypothecates it.

How much can I borrow against BTC in a Diamond Hands CDP?

Diamond Hands lets you borrow up to a maximum LTV of 66% at opening, and loans open at a minimum collateral ratio of 150%. In Mainnet Beta there is a 100 UCD cap for now.

What happens to the UCD when I repay?

UCD you repay is burned on Ethereum, and your debt and collateral ratio update in the same transaction.

When is a Bitcoin CDP liquidated?

A Diamond Hands CDP is liquidated in full if the collateral ratio falls below 110% during the term. After expiry, the threshold rises. Only specified liquidators can trigger it.

Sources

All checked 27 Oct 2026.

CoinDesk (James Van Straten), "Crypto vault deposits top $10 billion as lending risks draw regulatory scrutiny", 19 Oct 2026: coindesk.com.
CoinMarketCap (Alex O'Donnell), "Bitcoin Holders Borrow a Record $1.6B on Morpho Without Selling", 20 Oct 2026: coinmarketcap.com.

About the author

Benjamin Whitby

Protocol Lead, GVNR. LinkedIn

Benjamin Whitby discovered Bitcoin in 2013 and Ethereum in 2014, and has been building in crypto ever since. He has a background in capital markets and regulation and a degree in Physics from the University of Exeter. His focus is BTCFi, Bitcoin as collateral, BTC-backed stablecoins and how digital asset treasuries are reshaping credit. He's building at GVNR, home of Diamond Hands, where Bitcoin holders can borrow without giving up control of their UTXOs.

Diamond Hands is a decentralised protocol. Borrowing involves risk, including liquidation of collateral. Carry projections are illustrative model outputs, not return guarantees. Nothing on this site constitutes financial advice. Tax treatment depends on your circumstances, so take your own independent tax advice.