Protocol Flow

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1. Depositing Assets into Vaults

• User Action:
  The user selects an approved vault (e.g., a Berachain Reward Vault) and deposits a supported asset.
• Protocol Effect:
  • The vault contract records the deposit, tracks balances, and sets accrual for protocol-approved rewards/yield mechanisms.
  • Immediately, the user’s Proof-of-Collateral (PoC) record is updated, reflecting the additional principal and any earned yield. This is the real-time authoritative statement of the user’s collateral within the protocol.
• Result:
  The original assets remain in the vault, continue earning rewards, and the user’s updated PoC is now available to present as collateral throughout the system.

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2. Collateral Becomes Usable

• User View:
  • The deposited assets (and any accrued yield) are now reflected as “available collateral” in the user dashboard.
  • The user does NOT need to unstake, wrap, or shift assets further.
• Protocol View:
  • PoC is the single source of truth for what the user can borrow against. Vaults and PoC stay in sync automatically—any addition/removal is mirrored.
  • This up-to-date collateral can be checked by the protocol itself and by external, integrated protocols (including on other chains via relayer).

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3. Borrowing Against Collateral

• User Action:
  The user requests to borrow a supported asset, specifying the amount.
• Protocol Effect:
  • The borrowing module queries PoC for the user’s current collateral and outstanding debts.
  • Using price feeds and risk models, PoC computes borrowing limits and evaluates post-borrow health.
  • If safe, the borrow is executed: PoC is updated with the new debt, and the requested asset is sent to the user. If not, the transaction fails.
  • Interest on borrowed assets starts accruing immediately.
• Result:
  User has new liquid assets (while their original vault deposit still earns yield). The risk status is tracked live in the PoC and is always visible.

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4. Withdrawing Assets

• User Action:
  • User requests either a partial or full withdrawal of their vault assets.
• Protocol Controls:
  • Before processing, protocol checks PoC state to ensure all outstanding debts will remain safely collateralized post-withdrawal.
  • If not, withdrawal fails and user must first repay debt or adjust collateral.
  • Withdrawal, when successful, reduces the user’s PoC collateral in real time.
• Result:
  User regains liquidity; collateral availability (and therefore, possible borrow/usage power) decreases accordingly.

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5. Liquidation Monitoring & Handling

• Continuous Operation:
  • Protocol continually monitors each user’s PoC health factor (collateral vs. debt, with live price feeds).
  • If collateral value falls or debt grows so the health factor drops below the threshold, the protocol can immediately trigger liquidation.
  • Liquidation forcibly repays debt by seizing/selling collateral, protecting the system and lenders.
• User Responsibility:
  • Users must monitor their health factor (visible via dashboard) and act promptly on protocol alerts.
  • Unattended, unhealthy positions will be liquidated automatically, and only leftover collateral (after debt repayment) is returned.

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6. Composability—Using Your Collateral Elsewhere

• For the User:
  Because PoC is always current and on-chain, integrated protocols—money markets, perps, options, on Berachain or other chains—can trustfully read your collateral state and accept it as security, without requiring new deposits or extra capital.