Imagine you want to borrow a stablecoin (a cryptocurrency pegged to a real-world currency like the US dollar) but don't have any. A Collateralized Debt Position (CDP) is like using some of your other cryptocurrency as security to borrow that stablecoin. You lock up your crypto in a smart contract (a self-executing digital agreement) to generate the stablecoin loan. If you don't repay the loan, your collateralized crypto gets liquidated (sold) to cover the debt.
