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Basics

What Is Collateral?

Assets deposited to back or secure a financial position.

Definition

Collateral is the asset you deposit to mint synthetic tokens or borrow against. It provides security that the position can be settled. In synthetic protocols, collateral backs the value of minted tokens.

How It Works

You deposit collateral (e.g., stablecoins) into a protocol, which holds it in smart contracts. This collateral backs the synthetic tokens you mint. When you redeem, collateral is returned based on token values.

In Continuum

Continuum accepts stablecoins (USDC, USDT, USDv) as collateral. Deposit 1000 USDC and mint L/S tokens worth 1000 USDC combined. The protocol holds your stablecoins until you redeem by burning both L and S tokens.

Related Terms

Minting

The process of creating new synthetic tokens by depositing collateral.

Redemption

The process of burning synthetic tokens to receive back the underlying collateral.

More Basics Terms

Synthetic AssetLong Token (L Token)Short Token (S Token)Redemption

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