# What is Butane?

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## What is Butane?

Butane is a decentralized synthetic assets protocol built on the Cardano blockchain using Plutus smart contracts. Users can borrow synthetics from the protocol by locking up Cardano Native Tokens (CNTs) as collateral.

## Synthetic Assets

Synthetics are tokenized derivative assets. They are derived from assets whose prices are tracked on-chain via price feed oracle mechanisms. Synthetic assets allow for exposure to their corresponding underlying asset without requiring that the asset itself be physically owned, permitting complete freedom and interoperability on the blockchain.&#x20;

Butane provides the flexiblity for various kinds of synthetics, including more sophisticated offerings that derive from a basket of underlying assets, and more exotic assets such as "inverse" synthetics, which track the inverse price of another asset. Butane synthetics can be staked in the system to accrue rewards.

## Collateralized Debt Positions

All synthetics on Butane are backed by collateral. This is facilitated through the opening of Collateralized Debt Positions ("CDPs") - positions created when a user locks up CNT collateral and mints synthetic tokens as debt. Each synthetic on Butane has an associated set of parameters which dictate what CNTs can be used as collateral, as well as the individual borrowing powers of those assets with respect to each synthetic. CDP outstanding amounts accrue linearly overtime as interest, and CDPs with unhealthy loan-to-value ("LTV") ratios are subject to liquidation to ensure solvency.

{% hint style="info" %}
When you create a CDP with ADA, you retain staking rights to the locked ADA and can continue to earn staking rewards on Cardano's PoS mechanism.
{% endhint %}


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