Cap (CAP) is the native utility and governance token of the Cap protocol, an Ethereum-based onchain credit platform that issues a dollar-denominated stablecoin (cUSD) and a yield-bearing version of that stablecoin (stcUSD). The protocol is designed to connect lenders, borrowers and underwriters through a marketplace where every loan is backed by onchain financial guarantees rather than unsecured credit or governance decisions.

Unlike lending protocols that pool credit risk across all depositors, Cap assigns each borrower to an individual underwriter. The underwriter escrows their own collateral to guarantee repayment, making them the first party to absorb losses if a borrower defaults. This structure is designed to align incentives by ensuring the party approving credit also bears the associated risk.

Within the protocol:

• Lenders deposit supported stable assets to mint cUSD, which can then be staked into stcUSD to earn yield.
• Borrowers obtain dollar-denominated liquidity to deploy yield-generating strategies.
• Underwriters provide collateral that guarantees individual loans in return for underwriting premiums.
• Liquidators monitor borrower positions and liquidate underwriter collateral if predefined health thresholds are breached.

The CAP token supports governance, ecosystem participation and incentive programmes within the protocol.

CAP serves as the protocol's utility and governance token.

Its uses include:

• Governance: CAP holders can participate in governance decisions relating to protocol upgrades, ecosystem development and protocol parameters.
• Protocol incentives: CAP is distributed through ecosystem and community incentive programmes.
• Ecosystem participation: The token is used within the protocol's reward mechanisms as the ecosystem develops.

The protocol itself revolves around several financial products:

• cUSD, a dollar-denominated stablecoin backed by supported reserve assets.
• stcUSD, a yield-bearing token created by staking cUSD.
• Credit guarantees, where underwriters lock collateral to insure individual loans made through the protocol.

According to the project's documentation, if a borrower defaults or becomes undercollateralised, the underwriter's escrowed collateral is liquidated through permissionless auctions to replenish the reserve, with the aim of maintaining full backing for cUSD.

Cap operates through a marketplace of four participants whose incentives are aligned through smart contracts:

1. Lenders deposit approved reserve assets and mint cUSD.
2. Underwriters escrow collateral and choose which borrowers to support, setting their own underwriting premiums.
3. Borrowers draw liquidity against those guarantees to execute yield-generating strategies.
4. When loans are repaid, lenders receive yield, underwriters earn premiums and borrowers retain any yield above the protocol's hurdle rate.
5. If repayment fails or a borrower's position falls below required thresholds, the underwriter's collateral is liquidated before lender funds are affected.

The protocol isolates each borrower-underwriter relationship, meaning a default in one position does not automatically affect other loans. Rather than relying on governance committees to approve credit, loan allocation is determined by underwriters who are financially exposed to the decisions they make.

Cap was created by Benjamin Sarquis Peillard, who founded Cap Labs and serves as its Chief Executive Officer. Before founding Cap, he worked in investment banking at Citi and later held finance and strategy roles in the digital asset industry.

He is joined by Matthew W., who serves as Chief Technology Officer (CTO) and leads the protocol's technical development. Together with the wider Cap Labs team, they developed Cap as an onchain credit marketplace where loans are backed by financial guarantees enforced through smart contracts rather than discretionary credit allocation.