Abyss Reserve

The Abyss Reserve is a HYPE first-loss fund. If a Trawl leaves a Market with bad debt, the reserve repays that Market's lenders before they take a haircut.

What it is

The AbyssReserve contract holds WHYPE, accounted per Market. Each Market's reserve is isolated: HYPE set aside for one Market is never used to cover another Market's bad debt. This matches the isolation of Markets themselves. See Markets.

How it is funded

The reserve has two sources.

The protocol share

The protocol takes 10% of interest paid by borrowers and the 2% protocol share of every Trawl penalty. On testnet, that protocol share is split:

• half to the Market's Abyss Reserve
• half to the Treasury

At mainnet, the protocol share is documented to go 50% as HYPE into the Abyss Reserve and 50% to a TWAP buyback-and-burn of $BYTHOS, funded through the Treasury. On testnet there are no buybacks, because no $BYTHOS exists. $BYTHOS is not launched. No contract address.

Direct top-ups

A Market's reserve can also be topped up directly with fund(market, amount). A top-up goes to that one Market's reserve and deepens its first-loss layer without affecting any other Market.

Example

In one Market, borrowers pay 100 HYPE of interest over a period, and one Trawl closes a Line with 50 HYPE of debt.

Flow	Total	Lenders	Abyss Reserve	Treasury
Interest	100 HYPE	90 HYPE	5 HYPE	5 HYPE
Trawl protocol share (2% of 50 HYPE)	1 HYPE	none	0.5 HYPE	0.5 HYPE

The Market's reserve grows by 5.5 HYPE. The keeper who ran the Trawl receives 3% of 50 HYPE = 1.5 HYPE separately.

How it is used

The reserve pays out in one situation only: a Trawl sold all the collateral of a Line and still did not cover the debt.

1. The Market calls cover(amount) on its reserve for the shortfall. Only that Market can call cover for its own reserve.
2. The reserve pays what it holds, up to the shortfall.
3. Whatever the reserve cannot cover is written off across that Market's lenders only.

Example

A Line has 10 HYPE of debt. The pool has thinned out, and selling all of the collateral raises only 7 HYPE. Proceeds are paid in order, so the keeper's 3% bonus (0.3 HYPE) comes first and the Market receives 6.7 HYPE. The shortfall is 3.3 HYPE.

• If the Market's reserve holds 5 HYPE, it covers the full 3.3 HYPE. Lenders lose nothing. The reserve is left with 1.7 HYPE.
• If the reserve holds 2 HYPE, it pays 2 HYPE. The remaining 1.3 HYPE is written off across that Market's lenders.

Always HYPE

The Abyss Reserve always holds HYPE, never $BYTHOS. A first-loss fund held in the protocol's own token would lose value exactly when it is needed, since a large bad-debt event would also weigh on that token. Holding the same asset lenders supplied means a reserve of 5 HYPE can repay 5 HYPE of shortfall, whatever else is happening.

What it does not do

• It does not guarantee lenders against loss. If a Market's bad debt exceeds its reserve, lenders in that Market take the remainder.
• It does not move HYPE between Markets.
• It does not pay interest or yield to anyone.
• It does not cover anything other than Trawl shortfalls.

Read Risks for the full picture.