Protocol
Capacity and leverage
Capacity is bond times leverage. It decides whether a seller is paid instantly or whether a payment falls back to escrow.
The formulas
Three numbers decide how every payment is routed.
capacity = bond x leverage
open exposure = sum of instantly-paid payments still inside their refund window
free capacity = capacity − open exposure
- Bond is the USDC the seller has posted in BondVault.
- Leverage depends on the seller's age. See the tiers below.
- Open exposure is the amount the bond may still have to refund.
A payment is paid instantly when its amount fits inside free capacity. Otherwise it falls back to classic escrow until its window ends. Nothing is rejected.
Leverage tiers
Leverage grows with the seller's age in the SellerRegistry. A new seller starts fully collateralised and earns more room over time.
| Seller age | Leverage | Capacity with a 1,000 USDC bond |
|---|---|---|
| First 14 days | 1x | 1,000 USDC |
| Until day 30 | 2x | 2,000 USDC |
| After day 30 | 5x | 5,000 USDC |
At 1x, every instantly-paid payment is fully backed by the bond. At 2x and 5x the bond backs more open payments than it could refund all at once. This is a deliberate trade-off, and it is listed in Risks.
What counts as exposure
Only instantly-paid payments count, and only while their refund window is open.
| Payment state | Counts toward open exposure |
|---|---|
| Paid instantly, window still open | Yes |
| Paid instantly, window ended | No |
| Fell back to escrow | No |
| Refunded | No |
A payment that fell back to escrow is fully backed by its own escrowed funds. It does not count toward exposure and it does not use capacity.
Exposure is released automatically. When a payment's window ends, its amount leaves open exposure and the capacity is free again. A shorter refund window therefore lets the same bond support more volume.
Worked examples
Tiers over time
A seller posts a 1,000 USDC bond and never changes it.
| Day | Leverage | Capacity |
|---|---|---|
| 5 | 1x | 1,000 USDC |
| 20 | 2x | 2,000 USDC |
| 45 | 5x | 5,000 USDC |
An instant payout
Lea sells ceramics. She is past day 30.
bond 1,000 USDC
leverage 5x
capacity 5,000 USDC
new sale 180 USDC
route instant payout
fee 180 x 0.5% = 0.90 USDC
open exposure +180 USDC for the length of her window
If Lea had no other open payments, her free capacity after the sale is 5,000 − 180 = 4,820 USDC.
Over capacity
Later, Lea has a busy week.
capacity 5,000 USDC
open exposure 4,900 USDC
free capacity 100 USDC
new payment 180 USDC
180 is more than 100 → escrow until its window ends
The payment is accepted. The buyer is protected in the same way. Lea receives the 180 USDC when the window ends instead of at once. Her open exposure stays at 4,900 USDC, because the escrowed payment is backed by its own funds.
Lea has two ways to get back to instant payouts: wait for earlier windows to end, or add to her bond. Each extra 1 USDC of bond adds 5 USDC of capacity at her tier.
Limits that apply on top
Capacity is not the only rule.
- Per-payment cap. A single protected payment can be at most 2,500 USDC.
- Auto-freeze. If a seller's lost disputes go above 5% over 30 rolling days, leverage is frozen to 1x. With a 1,000 USDC bond, capacity drops from 5,000 to 1,000 USDC. New payments above free capacity go to escrow.
- Bond lock. A bond cannot be withdrawn while exposure is open against it.
The full list is in Seller guardrails.
Idle bonds
A bond that is not being used for refunds is designed to be deployed to Arc lending markets by BondVault. The seller keeps 90% of the USDC yield.
Yield is variable and can be zero. Lending markets carry their own risk, including the risk of loss. Nothing on this page is a promise of any return.
Related
- Seller guardrails
- Refund waterfall
- Try different bonds and windows in the simulator.