> ## Documentation Index
> Fetch the complete documentation index at: https://docs.positions.finance/llms.txt
> Use this file to discover all available pages before exploring further.

# Proof of Collateral

> Technical implementation of collateral verification

Proof-of-Collateral, a ERC 721 NFT is the user's on-chain accounting system and the backbone of composable collateralization. It continuously tracks, for every user:

* Total vault deposits and their types,
* Accrued (but not yet claimed) yield,
* Any outstanding borrowing or leveraged positions,
* The real-time net collateral eligible for new activity.

**Key functions:**

* **State engine:** All borrow, repay, withdraw, or leverage actions are instantly reconciled and validated via the PoC system. Users can never become “over-collateralized” due to stale data, and the protocol can enforce liquidation or risk caps with precision.
* **Composability point:**
  * PoC acts as the single source of truth for anyone in the wider DeFi ecosystem wanting to verify a user’s collateral state.
  * Partner protocols (on Berachain or, via relayer, on other chains) can reference PoC state to accept users’ positions as collateral—with no need for additional bridges or token wrappers.

### How It Works

1. **Live State Tracking**
   * On every deposit, withdrawal, yield event, borrow, or repay, PoC state is updated immediately via contract calls or emitted events.
   * PoC holds: asset balances, yield, outstanding borrows, and a computed health factor for every user.
2. **Core Logic for Eligibility & Risk**
   * All maximum borrow limits, withdrawal safety checks, and liquidation triggers are enforced using your current PoC state—no operation proceeds if it would make your account unsafe.
   * All actions across the protocol (even from different apps or integrations) funnel through PoC (with relayers), guaranteeing no “side channel” or hidden risk buildup.
3. **External Integration & Composability**
   * Protocols inside and outside Positions can programmatically integrate PoC—via relayer sync—for real-time collateral eligibility.
4. **Atomic Security**
   * Any update to PoC is either fully completed (commit) or reverts if it fails any check—ensuring integrity even in the face of errors, rapid price changes, or relay lags.
   * Liquidations, risk checks, and withdrawals always use the live PoC, never stale data.

**In Summary:**\
PoC is the protocol’s core accounting and control layer—a canonical, atomic record of all collateral and risk.