Verification is the foundation of Factor’s trust-minimized architecture.

To ensure that every receivable funded on the protocol is real, valid, and performing, Factor integrates two core mechanisms:

1. Proof-of-Reserves (PoR)
2. Proof-of-Performance (PoP)

Together, they provide a continuous, cryptographically verifiable link between off-chain receivables and on-chain financing activities.

6.1 The Need for Real-World Verification

Traditional receivable markets suffer from:

• document opacity,
• payment uncertainty,
• delayed reporting,
• lack of real-time updates,
• underwriter self-reporting biases,
• no public auditability,
• and no programmatic enforcement.

Factor eliminates these limitations by anchoring essential data to the blockchain and enforcing all economic rules through smart contracts and oracles.

This ensures that:

• All receivables financed via Factor are real
• Documentation is authentic
• Underwriter performance is verifiable