Factor is a decentralized credit infrastructure that enables the tokenization, verification, and financing of short-duration receivables on-chain. The protocol connects institutional underwriters with global crypto liquidity in a trust-minimized environment where incentives are fully aligned and risk is transparently accounted for.

Factor turns receivables into programmable digital assets—$F-NFTs—and creates a unified framework for real-world yield that is validated by oracles, enforced by smart contracts, and governed by token holders.

3.1 Core Principles

Factor is built on four foundational design principles:

1. Underwriter-First-Loss Alignment

Underwriters declare the expected default rate (EDR) of the receivables they submit and stake matching first-loss capital on-chain.

This ensures that:

• Underwriters benefit only when receivables perform well
• Investors are protected up to the EDR percentage
• Incentives are aligned toward conservative, high-quality credit selection

2. Fully Verifiable Real-World Assets

Each receivable is tokenized as an $F-NFT, with:

• Encrypted document hashes stored on IPFS
• Off-chain verification by underwriters
• Optional third-party audit
• On-chain publication of proof-of-reserves
• On-chain maturity verification (proof-of-performance)