Every Royco Dawn market revolves around two related but distinct numbers: coverage and utilization. Coverage tells you how much loss Junior can absorb before Senior is affected. Utilization tells you how efficiently that coverage capacity is currently being used. Together they define the health of a market, determine whether new deposits are accepted, and drive the yield premium that Junior depositors earn.Documentation Index
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Coverage
Coverage is the percentage of the total pool that Junior capital represents. Because Junior absorbs losses first, coverage directly equals the maximum drawdown the underlying yield source can experience before Senior depositors are touched. Example: A market with 10,000,000 in total deposits has 20% coverage. The underlying strategy can lose up to 20% of the total pool value before a single dollar of Senior capital is at risk.| Pool Component | Amount | Coverage |
|---|---|---|
| Senior deposits | $8,000,000 | — |
| Junior deposits | $2,000,000 | — |
| Total pool | $10,000,000 | 20% |
Minimum Coverage Requirement
Each Dawn market enforces a hard minimum coverage requirement set at market creation. If Junior capital falls below this floor, two actions are triggered automatically by the smart contract:- New Senior deposits are paused.
- Junior withdrawals are paused.
Utilization
Utilization measures how close Junior is to the coverage floor. It expresses the fraction of the journey from “maximum excess capital above the floor” to “exactly at the floor.”- Low utilization (e.g., 40%): Junior holds far more than the required minimum. There is plenty of cushion and the market can absorb significant new Senior deposits without approaching the floor.
- High utilization (e.g., 90%): Junior is efficiently deployed. The market is near its operating target, and Junior depositors earn a meaningful premium.
- 100% utilization: Junior is exactly at the required minimum.
At 100% utilization, both new Senior deposits and Junior withdrawals are blocked by the smart contract until Junior capital is replenished above the floor. The protocol enters this state automatically with no manual intervention required.
The 90% Target
The Yield Distribution Model targets 90% utilization as the market’s equilibrium operating point. This target serves both sides of the market:- For Seniors: a 10% buffer remains between Junior’s current level and the coverage floor, providing a meaningful cushion even in high-utilization conditions.
- For Juniors: utilization is high enough that the risk premium is substantial, making the market economically attractive for new and existing Junior depositors.
How They Interact
Coverage and utilization work together to describe the full state of a market’s risk capacity:- Coverage describes the size of the first-loss buffer relative to the pool — a fixed snapshot of maximum protection.
- Utilization describes how much of that buffer’s headroom has been consumed relative to the minimum floor — a dynamic measure of current efficiency.
| Scenario | Junior Balance | Coverage | Utilization | Meaning |
|---|---|---|---|---|
| Excess capital | Well above minimum | 20%+ | ~40% | Pool is over-collateralized; premium is lower |
| Target | At 90% of floor distance | ~20% | 90% | Efficient deployment; meaningful Junior premium |
| Floor reached | Exactly at minimum | 20% | 100% | Lockout active; deposits and withdrawals blocked |