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Edge Case Handling

Credit protocols need explicit behavior for edge cases. PRISM defines these cases so vault state remains deterministic and understandable.

First Deposit​

When a tranche has zero supply, there is no existing NAV denominator.

Rule:

shares_minted = usdc_deposited

The first depositor establishes the initial 1:1 relationship between tranche assets and tranche supply.

Total Wipeout​

If a tranche's assets reach zero, its NAV becomes zero.

Rule:

if total_assets == 0:
  NAV = 0

Tokens can still exist after a wipeout, but they retain no redemption value unless the protocol explicitly supports recapitalization logic.

Post-Wipe Deposit Restrictions​

Deposits are blocked into a tranche with:

  • NAV = 0
  • non-zero supply

This prevents new depositors from being minted into a broken accounting state where outstanding worthless tokens still exist.

Rounding​

All fixed-point math should use deterministic rounding rules.

Rounding behavior must be:

  • Reproducible.
  • Conservative.
  • Consistent across deposit, withdrawal, yield, and loss calculations.

Insufficient Reserve​

Withdrawals must not transfer more USDC than the vault reserve can support.

If reserve reconciliation fails, the operation should revert rather than silently underpaying the user.

Loss Greater Than Vault Assets​

If a submitted loss exceeds total vault assets, the protocol caps realized loss at available assets and wipes all tranches.

The remaining off-chain loss is outside the vault's recoverable accounting domain.