CDPs
On Mento V3, some stablecoins (e.g. GBPm) are synthetic: they are created when users borrow against collateral. Mento’s CDP system uses USDm as the collateral asset: you lock USDm and borrow other stables such as GBPm. This is a stable-on-stable setup rather than crypto collateral.
What you can do
Borrow — Deposit collateral (USDm) and borrow the stablecoin (e.g. GBPm). You open a trove, set your interest rate, and can run multiple troves per address.
Repay — Return the borrowed stable to reduce or close your debt and free collateral.
Stability pool — Deposit the debt token (e.g. GBPm) into a stability pool used in liquidations; you may earn rewards.
Troves can be adjusted (add/withdraw collateral, borrow more, repay) and closed. The system uses a Stability Pool and liquidations when troves become undercollateralized.
How to do it
Via the Mento app: Use the Mento app for borrow, repay, and stability pool flows. Connect your wallet (e.g. on Celo), select the CDP product (e.g. GBPm), deposit USDm as collateral, and borrow the stable.
Via the SDK: For programmatic or integrator use, the Mento SDK provides mento.borrow: open/adjust/close troves, read trove data and system params, and predict upfront fees. See Borrow (CDP). The SDK identifies each CDP system by the debt token (the stable you borrow, e.g. GBPm).
Mento CDPs and Liquity v2
Mento CDPs are a fork of Liquity v2. The CDP contracts live in a separate repository: mento-protocol/bold. The core mechanics (troves, user-set interest rates, liquidations, Stability Pool, redemptions) follow the Liquity v2 design. Liquity v2 uses ETH/LSTs as collateral and BOLD as the debt token; Mento’s fork uses USDm as collateral and FX-pegged stables (e.g. GBPm) as the debt token, with one independent instance per FX currency (each with its own TroveManager, StabilityPool, and FX price feed).
For full protocol and contract documentation (state variables, liquidation thresholds, fee flows, redemption mechanics), use the Liquity v2 documentation:
Liquity v2 documentation — protocol overview, technical resources, and contract behavior.
Liquity v2 whitepaper — design and economics.
For Mento-specific implementation (USDm collateral, FX oracles, multi-instance architecture, and FXPriceFeed), see the mento-protocol/bold README.
Critical risk considerations
Because Mento CDPs use USDm as collateral and FX-pegged debt (e.g. GBPm), the risk profile differs from crypto-collateralized systems like Liquity v2:
USDm depeg risk
All FX instances use USDm as collateral. A USDm depeg would cause correlated failure across all CDP instances — every trove’s collateral would lose value at once.
FX exposure
Unlike USD-pegged stablecoins, borrowers and Stability Pool depositors are exposed to foreign exchange rate risk: the debt token (e.g. GBPm) is pegged to GBP, which floats against USD.
Stability Pool FX loss
When liquidations occur, SP depositors receive collateral (USDm) in exchange for burned debt (e.g. GBPm). Because of FX rate dynamics, SP depositors may incur losses on liquidations — the USD value of collateral received can be less than the USD value of the debt absorbed. See the mento-protocol/bold README (Economics) for details.
Double liquidation risk
Troves can become undercollateralized from two directions: (1) FX rate movements (e.g. GBP appreciates vs USD, so debt value in USD rises), and (2) USDm depeg (collateral value in USD falls). Both can trigger liquidations.
Borrowers and SP depositors should understand these risks before opening troves or depositing to the Stability Pool. For full Mento-specific risk and economics analysis, see the mento-protocol/bold README.
Relation to FPMM liquidity
Mento uses CDPLiquidityStrategy to rebalance FPMM pools that hold the CDP-backed stable (e.g. GBPm). On expansion, the strategy draws debt from the Stability Pool; on contraction, it sources collateral (USDm) via redemptions. See Rebalancing & strategies and Liquidity strategies in Smart Contracts.
See also: Getting Mento stables · Overview · CDP smart contracts (Build) · Troubleshooting
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