Failure Propagation Across Settlement Domains
We characterize the ways in which a failure at one point in the obligation network — an unavailable execution endpoint, an unroutable corridor, a rebalancing shortfall — can and cannot propagate to other participants, and describe the failure domains NIL exposes at the protocol level.
1. Failure Is Not Reversal
A settled obligation is not undone by a downstream failure. Once local finality is granted, later network-level failures are represented as exposure that must be resolved by rebalancing, not as a reversal of the recipient's finality.
2. Failure Domains
NIL defines four terminal failure states for an obligation prior to finality: EXPIRED (execution window elapsed without assignment), REJECTED (terms could not be validated), UNROUTABLE (no corridor exists with sufficient capacity), and REBALANCE_REQUIRED (local finality achieved, but the supplying domain could not offset the resulting exposure within the epoch).
3. Containment
Each failure state is scoped to the obligation and the domains directly party to it. An UNROUTABLE obligation does not affect other obligations sharing the same origin or destination domain unless it reflects a structural corridor exhaustion, in which case subsequent obligations along that corridor will independently reach the same state until capacity is restored.
4. Observability
All failure states are surfaced as first-class obligation states in the protocol, not hidden behind generic errors. This is deliberate: the failure domain of an obligation is meaningful information for routing future intents and for network operators monitoring corridor health.