# External Positions An "external position" is a type of fund holding introduced in v4 that: * is not a fungible ERC20 token * exists outside of the vault as a distinct contract (one per external position instance) * reports its value to the fund in terms of its underlying holdings and liabilities * cannot have value withdrawn during a shares redemption (investors in funds that use external positions should almost never redeem in-kind, as any value inside of external positions will effectively be forfeited) * is a "beacon" proxy contract that uses the library dictated by the fund's current release (e.g., Sulu) ## External Position Types Each external position is associated with a "type" that is written to `ExternalPositionProxy.EXTERNAL_POSITION_TYPE` upon its deployment. This type (e.g., a Compound debt position) instructs the system as to which library and parser contracts to use with proxy interactions. A vault can have many active external positions of the same type. There are no globally-enforced limitations on the asset counts that can be managed within any external position. ## Persistent architecture An `ExternalPositionProxy` is deployed by a persistent `ExternalPositionFactory` , which serves as an enduring registry of external position "types" (e.g., Compound CDP) and all valid `ExternalPositionProxy` instances (i.e., those created via the factory). The `ExternalPositionProxy` is deployed with a `VaultProxy` as its owner. Upon each call, `ExternalPositionProxy` fetches its library via a `getExternalPositionType()` callback to its `VaultProxy`. Protected / trusted calls to state-changing actions in the `ExternalPositionProxy` should pass through a protected `receiveCallFromVault()` , guaranteeing the call passed through the owning `VaultProxy` . ## Release architecture The lifecycle of an external position is managed via `ExternalPositionManagerActions` on the `ExternalPositionManager` extension: * `CreateExternalPosition` -- create (deploy) a new external position and activate it on the `VaultProxy` * `CallOnExternalPosition` -- make allowed arbitrary calls to interact with the external position, and transfer assets to / from the `VaultProxy` * `RemoveExternalPosition` -- deactivate an external position from the `VaultProxy` * `ReactivateExternalPosition` -- reactivate an existing external position on the `VaultProxy` Each of these actions has its own policy hook, to allow granular control of risk management. The `ExternalPositionManager` stores two updatable reference contracts per external position type, which contain all logic specific to that type: * `lib` is the target library of the beacon `ExternalPositionProxy`, and contains the business logic for its local accounting and interactions with external protocols * `parser` is a contract used by the `ExternalPositionManager` to validate and parse call data for each specific action on its external position type For example, VaultA has a Compound CDP external position already deployed. To add collateral to the CDP: * an asset manager calls the `ExternalPositionManager` 's `CallOnExternalPosition` action via `ComptrollerProxy.callOnExtension()` with the desired payload to add 100 cDAI as collateral * the `ExternalPositionManager` looks up its stored `CompoundDebtPositionParser` and forwards it the payload * the `CompoundDebtPositionParser` validates the call, e.g., that cDAI is a valid cToken * the `CompoundDebtPositionParser` formats the outgoing 100 cDAI into `assetsToTransfer` and `amountsToTransfer` arrays, which it returns to the `ExternalPositionManager` * the `ExternalPositionManager` passes the payload along with the data for assets to transfer (100 cDAI) and to receive (none) to the `VaultProxy` * the `VaultProxy` transfers 100 cDAI to the target `ExternalPositionProxy` * the `VaultProxy` calls `ExternalPositionProxy.receiveCallFromVault()` , passing in the payload * `ExternalPositionProxy` calls back to the `VaultProxy` for the library to use for its type (Compound CDP), which it pulls from the `ExternalPositionManager` * the `ExternalPositionProxy` uses the returned `CompoundDebtPositionLib` to parse and execute the `AddCollateralAssets` action, adding cDAI to its internal accounting of its managed assets and interacting with Compound to use cDAI as collateral as needed. --- # Agent Instructions: Querying This Documentation If you need additional information that is not directly available in this page, you can query the documentation dynamically by asking a question. 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