Passthrough Halo — Business Overview

Executive Summary

The Passthrough Halo is a key infrastructure component of Sky's 2026 scaling roadmap, designed to enable rapid, scalable deployment of capital into real-world assets (RWA) through partnerships with institutional asset managers.

A Passthrough Halo acts as a specialized intermediary layer that connects Sky's capital allocation infrastructure with external asset managers. It provides standardized legal frameworks, smart contract infrastructure, and operational processes that dramatically reduce the time and complexity required to launch new investment products.

Key value proposition: Enable asset managers to offer Sky-compatible investment products with minimal legal overhead, standardized smart contract infrastructure, and rapid time-to-market — with the potential for hundreds of millions in capital deployment on Day 1 as every Prime in the ecosystem simultaneously rebalances into newly launched Units.

The Opportunity

Current Challenge

Deploying capital into real-world assets through DeFi requires:

• Complex bespoke legal structures for each asset type
• Custom smart contract development and audits
• Extended negotiation cycles with each counterparty
• Duplicated compliance and operational overhead

The Passthrough Halo Solution

Passthrough Halos create economies of scale by:

• Establishing reusable legal infrastructure that multiple asset types can share
• Deploying standardized smart contracts from a pre-audited factory
• Enabling asset managers to launch new products in days rather than months
• Providing Sky with strong, consistent recourse mechanisms across all deployments

The Capital Deployment Mechanism

Understanding why Passthrough Halos deliver immediate capital at scale requires understanding how Sky's allocation infrastructure works:

Sentinel-Driven Allocation

Every Prime in the Sky ecosystem is operated by a sentinel formation (stl-base + stl-stream + stl-warden) — an automated system that continuously optimizes capital allocation across available deployment targets. When a new Halo Unit becomes available, the sentinel formation:

1. Detects the new Unit via the Halo Artifact and governance registry
2. Validates proper onboarding — factory deployment, Sentinel integration, artifact reporting
3. Calculates optimal allocation based on risk parameters, yield, and portfolio balance
4. Executes rebalancing through the rate-limited allocation infrastructure

This happens automatically across every Prime. There's no manual decision-making, no relationship management, no capital raising calls. The infrastructure does the work.

What "Proper Onboarding" Means

For a Halo Unit to trigger automatic Prime rebalancing, it must meet baseline requirements:

Once these conditions are met, the Unit is indistinguishable from any other properly-onboarded deployment target. Primes treat it as part of their standard allocation universe.

The Network Effect

Each additional Passthrough Halo amplifies the value for asset managers:

• More Halos → more standardized infrastructure → faster onboarding
• More Units → more Prime demand for diversification → larger per-Unit allocations
• More capital deployed → more institutional credibility → more asset manager interest

This creates a flywheel where established Passthrough Halos become increasingly attractive partners for asset managers seeking immediate, scalable capital deployment.

Architecture Overview

┌─────────────────────────────────────────────────────────────────────┐
│                         SKY PROTOCOL                                 │
│                                                                      │
│   ┌─────────────┐                                                   │
│   │   Primes    │  Capital allocation entities within Sky           │
│   └──────┬──────┘                                                   │
│          │                                                          │
│          │  Deploy capital via standardized vaults                  │
│          ▼                                                          │
│   ┌─────────────────────────────────────────────────────────────┐   │
│   │                    PASSTHROUGH HALO                          │   │
│   │                                                              │   │
│   │   ┌───────────────┐   ┌───────────────┐   ┌───────────────┐ │   │
│   │   │  Halo Unit A  │   │  Halo Unit B  │   │  Halo Unit C  │ │   │
│   │   │  (e.g., CLO)  │   │ (e.g., T-Bill)│   │ (e.g., MMF)   │ │   │
│   │   └───────┬───────┘   └───────┬───────┘   └───────┬───────┘ │   │
│   │           │                   │                   │         │   │
│   └───────────┼───────────────────┼───────────────────┼─────────┘   │
│               │                   │                   │             │
└───────────────┼───────────────────┼───────────────────┼─────────────┘
                │                   │                   │
                ▼                   ▼                   ▼
        ┌───────────────────────────────────────────────────────┐
        │              ASSET MANAGEMENT PARTNERS                 │
        │                                                        │
        │   CLO Manager    T-Bill Provider    Money Market Fund  │
        └───────────────────────────────────────────────────────┘

Core Components

Halo Class Structure

Passthrough Halos are organized into Halo Classes — groupings of Halo Units that share the same smart contract infrastructure (PAU, sentinel) and legal framework.

Why Halo Classes Matter

A Halo Class enables tranched structures where multiple Halo Units share operational infrastructure while offering different risk/return profiles:

┌─────────────────────────────────────────────────────────────┐
│                    HALO CLASS: CLO Tranched                  │
│              (Shared PAU + lpha-lcts + Legal Buybox)         │
│                                                              │
│   ┌─────────────────┐        ┌─────────────────┐           │
│   │  Halo Unit:     │        │  Halo Unit:     │           │
│   │  Senior Tranche │        │  Junior Tranche │           │
│   │  (Lower yield,  │        │  (Higher yield, │           │
│   │   first claim)  │        │   second claim) │           │
│   └────────┬────────┘        └────────┬────────┘           │
│            │                          │                     │
│            └──────────┬───────────────┘                     │
│                       │                                      │
│              ┌────────▼────────┐                            │
│              │  Shared PAU     │                            │
│              │  + lpha-lcts     │                            │
│              └────────┬────────┘                            │
│                       │                                      │
└───────────────────────┼──────────────────────────────────────┘
                        │
                        ▼
              ┌─────────────────┐
              │  Underlying     │
              │  CLO Assets     │
              └─────────────────┘

What a Halo Class Shares

Note: lpha-lcts is an LPHA beacon (Low Power, High Authority) — a deterministic rule executor, not a sentinel. Sentinels (stl-base, stl-stream, stl-warden) have continuous real-time control and proprietary intelligence. LPHA beacons like lpha-lcts apply rules exactly as written without judgment. See beacon-framework.md for the full taxonomy.

What Halo Units Can Vary

This structure enables efficient capital deployment: one sentinel formation, one legal structure, multiple investment products with different risk/return characteristics.

How Halo Units Work

Each Halo Unit represents a specific investment product within a Halo Class and consists of:

1. Vault Interface (LCTS)

Halo Units use the Liquidity Constrained Token Standard (LCTS) — a queue-based system designed for assets with capacity or liquidity constraints.

How it works:

• Investors deposit assets into a queue and receive proportional shares
• The Unit Sentinel processes deposits and redemptions as capacity allows
• All investors in the same queue cohort share capacity fairly
• Investors can exit the queue at any time before their assets are deployed

Why LCTS?

• Many RWA strategies have limited capacity (e.g., specific bond offerings)
• Redemptions may require asset liquidation with delays
• Queue-based design ensures fairness without first-come-first-served competition

2. Capital Allocation Infrastructure

Each Halo Unit connects to Sky's Parallelized Allocation System (PAS):

• Rate limits control how much capital can flow in each direction
• All transactions are monitored and constrained by governance-approved parameters
• Emergency controls allow rapid response to market conditions

3. Off-ramp to External Assets

The Unit Sentinel manages the interface with external asset managers:

• Converts stablecoins to fiat via approved on/off-ramps
• Executes subscriptions and redemptions with underlying asset managers
• Reports positions and yields back to the protocol

Legal Infrastructure

Design Principles

The Passthrough Halo legal structure prioritizes:

1. Default Ownership to Sky
   In absence of legal intervention, Sky's designated entity (the Fortification Conserver) can assume direct control through established supervisory mechanisms. This ensures Sky is never dependent on lengthy legal processes to recover assets.

2. Standardized, Replicable Structures
   Legal frameworks are designed to be copy-paste deployable. New Halo Units can launch quickly using established templates rather than requiring bespoke legal engineering.

3. Pre-signed Integration
   Partners can pre-sign standardized agreements that enable automatic integration with new Halo Units, reducing negotiation cycles for each new product launch.

Governance Artifacts

Each Halo maintains detailed documentation:

These artifacts provide complete transparency and serve as operational playbooks for all parties.

Benefits for Asset Management Partners

Rapid Product Launch

Immediate Capital at Scale

This is the defining advantage of launching through an established Passthrough Halo:

When a new Halo Unit is properly onboarded — meaning it's deployed via the Laniakea Factory, integrated with the Halo Sentinel, and reporting all required data into the Halo Artifact — every Prime in the Sky ecosystem will simultaneously rebalance into the new Unit.

This isn't a gradual ramp-up. It's immediate, coordinated capital deployment across the entire protocol.

Why this happens:

1. Standardized risk framework: Once a Unit is onboarded through an established Passthrough Halo, Primes don't need individual due diligence — the Halo's governance and Sentinel infrastructure provides the assurance layer

2. Automated rebalancing: Sentinel formations continuously optimize allocations across available Halo Units. A newly available, properly-onboarded Unit triggers rebalancing across the entire Prime layer

3. Pre-approved integration: Primes have pre-signed agreements with established Passthrough Halos, eliminating per-Unit legal negotiation

4. Unified monitoring: The Halo Artifact and Sentinel infrastructure means all Units share consistent reporting, risk monitoring, and emergency procedures — reducing operational friction to near zero

The implication for asset managers: Your constraint becomes capacity management, not capital raising. The question shifts from "can we attract enough capital?" to "how much capacity can we offer?"

Access to Diversified Capital Sources

• Multiple capital sources: Any Prime within the Sky ecosystem can allocate to Halo Units
• Predictable inflows: Queue-based system provides visibility into pending deployments
• Institutional scale: Sky's allocation infrastructure is designed for billions in TVL

Reduced Operational Burden

• Automated operations: Unit Sentinels handle routine deposit/redemption processing
• Standardized reporting: Artifact system ensures consistent, auditable records
• Shared infrastructure: Compliance, monitoring, and emergency response handled at the Halo level

Launching a New Halo Unit

Process Overview

┌─────────────────────────────────────────────────────────────────────┐
│  1. DEMAND IDENTIFICATION                                           │
│     • Multiple Primes express interest in asset class               │
│     • Halo contributors identify suitable asset manager partner     │
└─────────────────────────────────────────────────────────────────────┘
                                    │
                                    ▼
┌─────────────────────────────────────────────────────────────────────┐
│  2. PREPARATION                                                      │
│     • Asset manager confirms readiness and terms                    │
│     • Unit Sentinel configured for asset-specific requirements      │
│     • Smart contracts prepared via Laniakea Factory                 │
│     • GovOps coordinates infrastructure setup                       │
└─────────────────────────────────────────────────────────────────────┘
                                    │
                                    ▼
┌─────────────────────────────────────────────────────────────────────┐
│  3. GOVERNANCE APPROVAL                                              │
│     • Halo Artifact Edit proposed with Unit specifications          │
│     • Standard approval process (typically days, not weeks)         │
│     • Smart contracts deployed from factory                         │
└─────────────────────────────────────────────────────────────────────┘
                                    │
                                    ▼
┌─────────────────────────────────────────────────────────────────────┐
│  4. LIVE — IMMEDIATE CAPITAL DEPLOYMENT                              │
│     • All Primes automatically rebalance into new Unit              │
│     • Potential for hundreds of millions in Day 1 inflows           │
│     • Unit Sentinel processes deposits and manages positions        │
│     • Ongoing monitoring and reporting via artifact system          │
└─────────────────────────────────────────────────────────────────────┘

Timeline Comparison

Governance and Risk Management

Halo-Level Governance

• Halo Sentinel maintains the Halo Artifact and coordinates governance
• Optional governance token allows stakeholder participation in Halo decisions
• Artifact Edits flow through Sky governance (Sky Spells, Prime Spells, Halo Spells)

Unit-Level Operations

• Unit Sentinel operates autonomously within parameters defined in the Unit Artifact
• Processes deposits and redemptions based on capacity and liquidity
• Maintains detailed logs of all activities
• Monitors external asset manager for risk signals

Emergency Procedures

• Unit Artifacts specify warning signals and response procedures
• Migration paths defined for moving assets to alternative structures if needed
• Fortification Conserver can intervene through supervisory mechanisms

Technical Integration

Smart Contract Stack

Each Halo Unit deploys standardized infrastructure:

Laniakea Factory

All smart contract infrastructure deploys from the Laniakea Factory:

• Pre-audited contract templates
• Automatic configuration based on Unit parameters
• Immediate integration with governance systems
• No custom development required for standard deployments

Summary

The Passthrough Halo represents a fundamental shift in how DeFi protocols can partner with traditional asset managers:

• For Sky: Scalable, consistent access to diverse RWA yield strategies with strong governance and recourse
• For Asset Managers: Immediate access to hundreds of millions in capital the moment a Unit launches — no fundraising, no gradual ramp-up
• For the Ecosystem: Standardized infrastructure that compounds in value as more Units launch

The core insight is this: capital raising becomes a solved problem. Once an asset manager is integrated with an established Passthrough Halo, their constraint becomes capacity — how much can they deploy? — not capital attraction. Every properly onboarded Halo Unit triggers automatic rebalancing across the entire Prime layer, delivering institutional-scale capital on Day 1.

By establishing reusable legal frameworks, pre-audited smart contracts, and automated operational processes, Passthrough Halos transform what was previously a months-long bespoke integration into a streamlined, repeatable process that can scale to support dozens of investment products across multiple asset managers.

Next Steps for Partners

Interested asset managers should contact Sky to discuss:

1. Asset types suitable for Halo Unit deployment
2. Capacity and liquidity characteristics for LCTS configuration
3. Legal entity requirements and pre-signing arrangements
4. Technical integration requirements for position reporting and redemption processing
5. Timeline for initial Unit launch

Document Version: 0.1
Last Updated: January 2026