Risk Capital Ingression

Status: Draft Last Updated: 2026-01-27

Overview

Risk Capital Ingression defines how Primes receive and recognize external risk capital as part of their official capital base under the Sky Risk Framework.

Core Principle: Not all egressed capital counts equally. The ingression rate depends on capital quality — synomic status, duration commitment, and the Prime's existing capital composition.

Ingression vs Loss Absorption: The ingression rate determines how much leverage a Prime can take — it is a capital adequacy measure. The loss absorption waterfall (see Appendix B) uses nominal capital: if a Prime has $100M nominal EJRC, the full $100M absorbs losses regardless of its ingression-adjusted effective value.

The Universal Ingression Curve

All ingression uses the same curve shape: a flat zone followed by a quarter circle.

Curve Shape

Marginal
Rate
      |
      |
 1.0  |====================-----------_____
      |                                    ----___
      |                                          ---__
      |                                               --_
      |                                                  -_
      |                                                    -
      |                                                     \
      |                                                      \
      |                                                       \
      |                                                        \
      |                                                        |
      |                                                        |
 0.0  +---------------------|----------------------------------|-----> Capital
      0                  anchor                               max
      |------- flat --------|------------ curve ---------------|
      |-------- 1x ---------|--------------- 2x ---------------|

Three zones:

Formula

For x ≤ anchor:
    marginal_rate = 1.0

For anchor < x ≤ max:
    marginal_rate = √(1 - ((x - anchor) / (max - anchor))²)

For x > max:
    marginal_rate = 0

Key Properties

• Smooth transition at anchor point (tangent is horizontal, no kink)
• Steepens progressively as you approach max
• Vertical at max (marginal rate hits zero)
• Max effective capital = anchor + (max - anchor) × π/4

SRC Ingression (Senior Risk Capital)

SRC ingression rate depends on the Prime's effective JRC base.

Parameters

Example with 100M Effective JRC

Max theoretical effective SRC = 1.5 × JRC + 3 × JRC × π/4 ≈ 3.86 × effective JRC

EJRC Ingression (External Junior Risk Capital)

EJRC ingression depends on two quality dimensions: synomic status and duration commitment.

EJRC Types

Quality Dimensions

Synomic status: Whether the egression decision was made by a framework encoded in the Synome — auditable, transparent, provably not stupid.

• Non-synomic: base multiplier (1×)
• Synomic: 2× multiplier on anchor and max

Duration commitment: How long the capital is committed before it can exit.

• Maximum useful duration: 24 months
• Minimum threshold: 3 months (below this, no duration credit)
• Linear scaling from 3 to 24 months

EJRC Anchor/Max Formula

duration_multiplier = 1 + (months / 24)    for months ≥ 3
duration_multiplier = 1                     for months < 3

synomic_multiplier = 2    if synomic
synomic_multiplier = 1    if non-synomic

anchor = 1 × IJRC × synomic_multiplier × duration_multiplier
max = 3 × IJRC × synomic_multiplier × duration_multiplier

EJRC Ingression Table

Duration Mechanics

Structure Options

EJRC can be structured as:

Uningression Delay

The uningression delay is the countdown period after exit is called. It's agreed upfront and determines the load (quality) of the EJRC.

Key insight: If you agree to a shorter uningression delay (e.g., 12 months), your perpetual phase load is as if you're always at that point in the countdown. The load is constant — capital doesn't get dumber just because time passes.

Exit Mechanics

Either party can initiate exit:

Instant exit rules:

Why Prime might negotiate instant release:

• Flexibility to swap capital sources
• New, cheaper EJRC becomes available
• Egressor accepts more risk → may demand higher yield

Normie TEJRC (Tokenized EJRC)

TEJRC is the standard, tokenized form of EJRC accessible via LCTS.

Subscribe (Ingression)

• Prime pulls from LCTS SubscribeQueue at will
• No limit on how fast Prime can ingress

Redeem (Uningression)

• Prime sets redemption rate (e.g., 20% of ingressed TEJRC per week max)
• Plus minimum fixed amount (ensures some liquidity)
• Rate changes require governance + long delay (TEJRC holder protection)

TEJRC Quality

TEJRC is always:

• Non-synomic (synomic EJRC uses bespoke bilateral deals)
• Zero duration (no contractual lock, just queue constraints)

This makes normie TEJRC the lowest quality EJRC with anchor = 1× IJRC, max = 3× IJRC.

MC-Based Total RC Cap

The Prime token metrics provide an upper limit on total effective ingression (IJRC + EJRC + SRC). This ensures total leverage capacity is tied to market validation of the Prime.

The Principle

A Prime's capital is only as credible as the market believes the Prime is. If the Prime token is worthless or illiquid, the Prime's "skin in the game" is meaningless — there's nothing of value at stake, or no genuine price discovery.

Equivalent MC Calculation

Each metric converts to an equivalent MC via a multiplier. The effective MC is the minimum across all metrics.

effective_MC = min(actual_MC, equiv_MC_volume..., equiv_MC_turnover...)

Metrics and Multipliers

Volume Metrics (ADV = Average Daily Volume):

Turnover Metrics (unique tokens changing hands):

Note: Turnover measures distinct tokens that changed hands, not just volume. High volume with low turnover indicates wash trading (same tokens traded back and forth).

Worst-of-Observed Approach

The effective MC is the minimum of actual MC and all equivalent MCs:

effective_MC = min(
    actual_MC,
    weekly_adv × 100,
    monthly_adv × 125,
    quarterly_adv × 167,
    monthly_turnover × MC × 29,
    quarterly_turnover × MC × 15,
    yearly_turnover × MC × 10
)

Why "worst of": You need ALL signals to be healthy. One weak link caps everything.

MC-Based Ingression Curve

Same flat + quarter circle shape as other ingression curves.

Example

Prime with $100M effective MC:

Max theoretical total RC = 5× + 10× × π/4 ≈ 12.85× effective MC

Worked Example: Bottleneck Identification

effective_MC = min($200M, $150M, $150M, $167M, $160M) = $150M

Bottleneck: Weekly and monthly ADV are below healthy levels. The Prime can ingress up to:

• Anchor: $750M total effective RC (full rate)
• Max: ~$1.93B total effective RC (theoretical max)

Independent Trader Registry (Future)

An additional metric is planned but TBD: independent trader participation.

Key principles:

• Reputation based on profitable Prime token trading across multiple Primes
• Indifference to which Prime signals genuine price discovery
• A trader who only trades one Prime's token could be an insider

This metric would add another equivalent MC to the worst-of calculation.

Capital Requirement Calculation

For Prime capital adequacy:

Effective JRC = IJRC + Σ(EJRC_i × EJRC_ingression_rate_i)

Effective SRC = Σ(SRC_j × SRC_ingression_rate_j)

Total Risk Capital (TRC) = (Effective JRC + Effective SRC) × MC_multiplier

Capital Adequacy = TRC ≥ Total Required Risk Capital (TRRC)

Where TRRC comes from the Risk Framework (duration matching, gap risk, etc. — see risk-framework/capital-formula.md).

Note: This equation covers portfolio risk capital only. Operational Risk Capital (ORC) is a separate, guardian-funded requirement outside this adequacy check — see risk-framework/operational-risk-capital.md.

Incentive Alignment

The continuous ingression rate creates natural incentives:

Summary

Ingression Hierarchy

Prime Token Metrics → MC-based cap on total
          ↓
       IJRC (base)
          ↓
       EJRC (quality-adjusted)
          ↓
       SRC (JRC-ratio adjusted)

Key Parameters

All curves use the same quarter-circle shape with 3:1 max-to-anchor ratio.

MC Metrics Summary

This document defines the continuous ingression rate model. Ingression creates units — cross-book links that appear as liabilities on the Prime's book and assets on the capital provider's book; see books-and-units.md for the foundational book/unit pattern. For LCTS queue mechanics, see smart-contracts/lcts.md. For capital requirements, see risk-framework/README.md.