Loss allocation follows a defined order
When an eligible loss occurs, the reference design allocates it through separate account classes in a pre-defined sequence. The purpose is to make the result inspectable rather than discretionary.Principles
- Position-level collateral, cash, debt, and outcome-token balances are reconciled first.
- Junior backstop capital bears eligible losses before senior credit under the stated priority rules.
- Finite reserve capacity is accounted for independently and cannot be treated as unlimited insurance.
- Simultaneous eligible claims use exact integer allocation rules so the same inputs produce the same distribution.
The loss-allocation model is a reference accounting design. It does not
eliminate loss or guarantee that capital will be available in any circumstance.