Residual Liquidity Rebalancing
1. ABSTRACT
Describes how residual exposure remaining after compression is ultimately resolved through physical capital displacement between Settlement Domains.
2. MOTIVATION
Cyclic compression reduces gross obligation value but rarely reduces it to zero. Structurally net-importing or net-exporting domains require an explicit mechanism to restore balanced liquidity over time.
3. TERMINOLOGY
Tolerance — the configured exposure band a domain may carry across epochs before rebalancing becomes mandatory.
4. SPECIFICATION
At epoch close, residual exposure per domain pair is queued for rebalancing. Rebalancing MAY be satisfied through: (a) scheduled capital transfer between domain liquidity pools, (b) absorption into the following epoch if the domain's exposure remains within tolerance, or (c) external liquidity provisioning outside the scope of this proposal.
A domain whose exposure exceeds its configured tolerance for more than one epoch MUST be flagged and new obligation routing toward it MUST be throttled until rebalancing completes.
5. INVARIANTS
A domain exceeding tolerance for more than one epoch MUST be flagged, and new obligation routing toward it MUST be throttled until rebalancing completes.
6. FAILURE CONDITIONS
A domain that cannot rebalance accumulates exposure indefinitely; throttling acts as a circuit breaker, but no hard exposure ceiling is yet defined.
7. SECURITY CONSIDERATIONS
Rebalancing delay is the primary systemic risk surface in NIL: a domain that cannot rebalance accumulates exposure indefinitely. NIP-0008 defines throttling as a circuit breaker but does not currently define a hard exposure ceiling.
8. REFERENCE IMPLEMENTATION
The reference implementation is the NIL-0 simulation network. No production implementation of this proposal exists; behavior described here is normative for the simulation only.