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Core Protocol Layer

The Core Protocol Layer is the deterministic execution engine of PRISM. It owns the vault accounting model, tranche state, NAV calculation, yield waterfall, and default resolution.

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Vault

A vault represents a single credit pool containing multiple risk tranches. Each vault tracks:
  • USDC reserve.
  • Tranche configuration.
  • Total assets across tranches.
  • Credit event history.
  • Permission and pause state.
A vault is not a generic pool. It is a structured credit container with explicit rules for who gets paid first and who absorbs losses first.

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Tranches

Each vault is partitioned into three tranches:
TrancheDescriptionWaterfall PositionLoss Position
PrimeLoss-protected exposure (junior tranches absorb first)Paid firstAbsorbs last
CoreIntermediate risk exposurePaid secondAbsorbs second
Alpha15% target-yield exposure (first-loss capital)Paid lastAbsorbs first
Each tranche maintains:
  • total_assets
  • total_supply
  • NAV per share
  • target yield parameters, where applicable
  • token mint relationship
NAV is the intrinsic accounting value of one tranche token. 
NAV = total_assets / total_supply
Deposits mint shares based on current NAV. Withdrawals burn shares and redeem USDC based on current NAV. Yield increases tranche assets. Loss decreases tranche assets.

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Waterfall Distribution

Incoming yield is allocated in priority order:
  1. Prime tranche.
  2. Core tranche.
  3. Alpha tranche.
Target rates define how much yield each tranche is entitled to in priority order: Prime targets 5%, Core targets 8%, and Alpha targets 15%.

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Default Resolution

Losses are applied in reverse priority:
  1. Alpha absorbs losses first.
  2. Core absorbs remaining losses after Alpha is depleted.
  3. Prime absorbs losses only after subordinate tranches are depleted.
This makes subordination explicit. Prime protection is not magic; it exists because junior capital is placed below Prime in the loss stack.

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Reserve Invariant

The core accounting invariant is: 
vault_usdc_reserve = prime_assets + core_assets + alpha_assets
When yield enters, both the reserve and tranche assets increase. When a loss is realized, USDC leaves the vault and tranche assets decrease through the cascade.