> For the complete documentation index, see [llms.txt](https://docs.wildcat.finance/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.wildcat.finance/using-wildcat/day-to-day-usage/optional-collateral-contracts.md).

# Optional Collateral Contracts

How a borrower can pledge separate, liquidatable ERC-20 collateral to back a market.

Wildcat allows for a borrower to deploy one or more smart contracts holding assets that can be liquidated and transferred in to a specific Wildcat market should capital calls (withdrawal requests) not be honoured in the appropriate time frame. The intention here is to offer lenders a mechanism by which they can underwrite a credit opportunity by referring to backing assets visible on-chain.

While the 'default' behaviour of Wildcat is that markets are under/uncollateralized depending on the [reserve ratio/CRR](/using-wildcat/terminology.md#reserve-ratio) set on creation, making use of collateral contracts permits a market to be partially, fully or even *over*collateralised, in *any* ERC20 asset provided that there is a path to convert them to the underlying (base) asset of a Wildcat market.

This is distinct from the concept of a borrower 'over-repaying' assets to a market itself (i.e. transferring 1,000 USDC to a market where they only have 900 USDC in outstanding debt) - collateral contracts are defined in assets that are *different* to the asset being borrowed, such as depositing Wrapped Ether (WETH) as a pledge against a USDC credit line.

In the current version of collateral contracts, the assets pledged within a collateral contract are not deployed further to, for example, yield farm: rather, they sit 'in stasis' until the earlier of:\
\
a) the market being terminated (all outstanding debt is repaid), whereupon the borrower can withdraw the assets from the collateral contract, or\
\
b) the market enters penalised delinquency, whereupon the appropriate amount can be liquidated by an approved executor address into the underlying asset of the market and repaid.

#### Using Collateral Contracts As A Borrower

<figure><img src="https://3883868503-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2F6pe0lcSG28G9FkBQU0Cy%2Fuploads%2FXBMaqYMMj5EjcMCq8Q5h%2Fimage.png?alt=media&amp;token=1bdf1003-6eab-4c28-add0-3db76591eb00" alt=""><figcaption></figcaption></figure>

<figure><img src="https://3883868503-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2F6pe0lcSG28G9FkBQU0Cy%2Fuploads%2FYeDczVnGYnqowWa1StNc%2Fimage.png?alt=media&amp;token=466daf69-bc12-4b66-954e-07516eae720d" alt=""><figcaption></figcaption></figure>

<figure><img src="https://3883868503-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2F6pe0lcSG28G9FkBQU0Cy%2Fuploads%2FVLQK4BmMwohUApSjyUb8%2Fimage.png?alt=media&amp;token=102c3c60-b3c1-48fa-9075-91fed6dec60c" alt=""><figcaption></figcaption></figure>

<figure><img src="https://3883868503-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2F6pe0lcSG28G9FkBQU0Cy%2Fuploads%2FVh1FO9KN0aNEQnoqSb4p%2Fimage.png?alt=media&amp;token=423351ae-bb16-48d4-a568-23108b1ae54a" alt=""><figcaption></figcaption></figure>

<figure><img src="https://3883868503-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2F6pe0lcSG28G9FkBQU0Cy%2Fuploads%2FhVXuFWLu10fPtqxQwSwp%2Fimage.png?alt=media&amp;token=be934e37-8831-40a3-9984-3b13c06c30c2" alt=""><figcaption></figcaption></figure>

<figure><img src="https://3883868503-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2F6pe0lcSG28G9FkBQU0Cy%2Fuploads%2FYYpgSkCapX7AuIUz81XH%2Fimage.png?alt=media&amp;token=ff90ec9e-1ca9-41ff-be45-f75363e5336b" alt=""><figcaption></figcaption></figure>

<figure><img src="https://3883868503-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2F6pe0lcSG28G9FkBQU0Cy%2Fuploads%2FMfbwfQFKHbNf6ruzKlxU%2Fimage.png?alt=media&amp;token=9d3985ca-091c-4e98-9796-f468c082bf8a" alt=""><figcaption></figcaption></figure>

<figure><img src="https://3883868503-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2F6pe0lcSG28G9FkBQU0Cy%2Fuploads%2F2NCtLu0EpOWwCOigu2h0%2Fimage.png?alt=media&amp;token=e73475d8-7008-4a71-afa4-4bb2327268c1" alt=""><figcaption></figcaption></figure>

<figure><img src="https://3883868503-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2F6pe0lcSG28G9FkBQU0Cy%2Fuploads%2F0fAB10tfgWn6xFCdkVxt%2Fimage.png?alt=media&amp;token=d196679c-80b8-4f01-906b-f642f4c9b4ee" alt=""><figcaption></figcaption></figure>

#### Technical Details