The terms, defined once

The asset manager is a bounded allocation role, authorised to trade within custody, venue and allowlist constraints without the power to write accounting values into the ledger.

It is an appointment rather than a holding. A manager can be authorised to allocate and trade and still be structurally unable to mark its way out of a loss.

See Marking authority , Mark

A Bond is a dated, transferable position in the risk-bearing layer of the balance sheet, indexed to one of forty quarterly maturities extending to a ten-year horizon.

A Bond buys deployed risk deliberately and is paid for carrying it. It pays the Hazard rate for the capacity it uses and recovers that payment through the Hurdle before surplus is divided. Losses reach the Bond book only where Equity cannot absorb them.

See Hazard , Hurdle , Maturity bucket , Equity

A cycle is ninety days of accrual followed by a single twenty-four hour settlement window, and it is the unit in which the balance sheet is closed.

During accrual the Reserve and Hazard operate under their own rules. At the window, valuation and settlement occur in a prescribed order. The cycle length is fixed at deployment rather than adjustable in operation.

See The period close , Hazard

The distribution gate separates distributable surplus from capital that must remain in the structure, so capital does not become withdrawable merely by having entered the balance sheet.

It is what prevents Equity from deferring a senior obligation in a cycle and extracting its own capital in the same window.

See Minimum capital threshold , Equity

Equity is the first-loss residual on the balance sheet: it absorbs loss before any other position, ranks last in a wind-down, and is not a tokenised claim.

It is a derived quantity rather than a stored one, equal to the two asset books less the claims ranking above it. It receives the residual economics and the Reserve accrual, and its distributions are gated.

See Distribution gate , Minimum capital threshold , The conserved balance sheet

Hazard is the rate the Bond book pays for the balance-sheet capacity it uses, accruing daily and credited to liquid kUSD holders.

Its level is formulaic rather than negotiated, and it responds to the term-weighted risk state of the Bond book. It is a fee for capacity, not a share of investment return, so it does not vary with how the risky book performs.

See Liquid kUSD , Bond , Hurdle

The Hurdle is the threshold applied to profit distribution through which Bond holders recover the Hazard rate they paid, at twice the amount paid, before surplus is divided.

The sequence is fixed: capacity is paid for through Hazard, the payment is recovered through the Hurdle, and only what remains above it is divided.

See Hazard , Bond

The hybrid high water mark is the rule that accrued preferential recovery claims decay by half every cycle, so they neither persist indefinitely nor vanish at once.

It sits between two conventional extremes: a hard high water mark that can leave a position permanently underwater, and no mark at all, where past losses are simply forgotten. A claim stays economically meaningful for the cycles immediately after the event and fades thereafter.

See Preferential recovery claim

The issuance price is the entry price for new liquid kUSD, determined by the state of the balance sheet rather than fixed at par, and rising as the risk ratio rises.

A depositor pays the average across the curve their own deposit traverses rather than the price it opened at, because the deposit lowers the risk ratio as it fills. Economically equivalent deposits therefore receive equivalent treatment.

See Risk ratio , Liquid kUSD

Liquid kUSD is the senior, transferable claim on the balance sheet: it ranks ahead of Bonds and Equity, earns the Hazard rate the Bond book pays, and carries no asset exposure.

Loss reaches it last and least, after Equity and then the Bond book. It is compensated for lending balance-sheet capacity rather than for taking asset risk, and the two are separated deliberately.

See Hazard , Senior claim , Bond , Equity

A mark is an asserted value for an asset the system cannot measure directly, posted through the valuation process at the period close.

The distinction that matters is between measured and asserted. Quantities are measured from custody the model itself controls; only values are asserted, and only by the marking authority.

See Marking authority , The risky book , The period close

The marking authority is a nominated seat that asserts the values the system cannot measure directly, separated by design from the parties that allocate assets or write the ledger.

It is an appointment the issuer makes when configuring an instance, not a position anyone holds. The separation is what prevents a party that acquires an asset from also pricing it.

See Mark , Asset manager

A maturity bucket is one of forty quarterly maturities extending to a ten-year horizon, against which Bond positions are indexed.

Because positions are dated rather than pooled, duration is a decision the holder makes, and the maturity structure feeds directly into the pricing of balance-sheet risk. The result is a term capital market rather than a single undifferentiated pool.

See Bond

The minimum capital threshold is the level of Equity capital that must remain in the structure, set at the start of each cycle before that cycle's outcome is known.

Only the excess above it can be withdrawn, and then only subject to the state of the system at the point of withdrawal. Because it is fixed in advance, it cannot be reassessed once the result is visible.

See Distribution gate , Equity

A partial tender returns Reserve assets to liquid kUSD holders at par, alongside full liquidation, as a means of contracting a balance sheet that would otherwise only expand.

The quantum of contraction is variable; the price is parity. Its purpose is to maintain balance-sheet efficiency rather than to guarantee parity to the Reserve price.

See Reserve , Liquid kUSD , Wind-down

A preferential recovery claim is an absorbed loss carried as a prior claim on subsequent profit, rather than written off at the point it is absorbed.

Both Equity and Bonds accrue them. They rank ahead of ordinary profit distribution, and they decay rather than persisting indefinitely.

See Hybrid high water mark , Equity , Bond

The Reserve is the asset book that backs liquid kUSD, maintained separately from the deployed risky book and never spent to create risk-bearing assets.

It is one of the two asset books on the balance sheet. Its accrual belongs to Equity. Because it is not the source of the risky book, growth in deployed risk cannot be funded by drawing it down.

See The risky book , Liquid kUSD , The conserved balance sheet

The risk ratio is the risky half of the Bond book measured against the Reserve, and it is the single state variable the issuance price responds to.

At zero deployed risk the ratio is zero and the entry price is par. As Bond capital grows relative to the Reserve, the ratio rises and the price rises with it. A deposit adds to the Reserve, so it lowers the ratio as it fills.

See Issuance price , Reserve , Bond

A senior claim is one satisfied ahead of those beneath it, and in kUSD the ranking runs liquid kUSD first, then Bonds, then Equity, established before any gain or loss occurs.

The ordering is embedded in the settlement mechanics rather than left to an issuer's decision after an adverse event. Profit and loss do not follow the same allocation rule, and each has its own fixed order.

See Liquid kUSD , Bond , Equity

The conserved balance sheet is the accounting model underlying kUSD: the two asset books, Reserve and risky book, always equal the three ranked claims, Bond principal, liquid supply and Equity.

Equity is what makes the identity hold: it is not stored or minted, but read as the residual. No posting can create value on one side without a matching entry on the other.

See Reserve , The risky book , Equity

The period close is the settlement window that follows each accrual cycle, in which the book is marked, the period's profit and loss is attributed, and new capital is admitted, in that order.

The ordering is the mechanism rather than a policy. Bond holders commit only after the book has been marked and the period's economics attributed, and Equity withdraws only after the relevant flows have landed.

See Cycle , Mark , Distribution gate

The risky book is the deployed asset book whose value can move, and it comes into existence only after a holder has bought that risk at a defined maturity.

It is marked at the period close rather than continuously. It is the second of the two asset books, and its existence is conditioned on Bond capital having been committed first.

See Bond , Mark , The conserved balance sheet

A wind-down is the specified terminal path for an instance, with defined triggers and a defined rank order, rather than mechanics designed during a crisis.

Triggers are voluntary liquidation by Equity, events of default, or a partial tender. The Reserve is applied through the seniority order, the risky portfolio goes to auction-based price discovery rather than going-concern marks, Bond positions stay transferable, and Equity ranks last.

See Partial tender , Senior claim , Equity