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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.

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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.

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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.

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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.

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Rounding

All fixed-point math should use deterministic rounding rules. Rounding behavior must be:
  • Reproducible.
  • Conservative.
  • Consistent across deposit, withdrawal, yield, and loss calculations.

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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.

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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.