Reserve Policy

UCE maintains a per-asset reserve to guarantee fast, deterministic settlement for 0x → A redemptions without waiting on vault (pocket) withdrawals. For each supported underlying, governance sets a reserveBps that determines what fraction of every inbound A → 0x deposit is retained on the UCE contract as immediately spendable liquidity; the remainder is forwarded to the asset’s configured pocket (custody address).

How it works (lifecycle):

• On A → 0x: The engine splits the received underlying for that asset: reserve slice stays on-contract; pocket slice is forwarded to the asset’s pocket (or the referral allocator’s pocket, when applicable). The reserve is tracked per asset and reflected on-chain in the contract’s balance, making capacity auditable.

• On 0x → A: Redemption sources underlying in priority:

  • on-hand reserve for that asset, consuming tracked units first;

  • referral allocator pocket (if provided);

  • global pocket. All pocket pulls are strictly bounded by allowance and balance - no implicit rehypothecation, no synthetic underlying mint.

• Per-asset tuning: Each underlying has its own reserveBps, enabling heterogeneous liquidity postures (e.g., higher reserve for choppy assets, lower reserve for deep, stable assets). Typical operating ranges are 10–50% depending on redemption latency targets, pocket refill cadence, and yield trade-offs.

Why it matters (trade-offs & guidance):

• Latency vs. yield: Higher reserves improve instant redemption depth and reduce pocket dependency, at the cost of lower capital efficiency (less principal earning yield in pockets). Lower reserves maximize yield but increase reliance on pocket pulls and their gas/latency profile.

• Transparency & solvency: Because reserves are on-contract balances and pocket pulls are allowance-bounded, redemption capacity is explicit and auditable; insufficient pocket liquidity results in a revert rather than hidden shortfalls.

• Interplay with dynamic fees: During redemption surges, the dynamic fee raises marginal exit cost while the reserve buffers immediate demand. As pressure decays, fee recedes and reserves are replenished by new A inflows and pocket refills.

Operational tips:

• Increase reserveBps for assets with volatile demand or slower pocket withdrawal SLAs.

• Decrease reserveBps when pocket liquidity is abundant, withdrawal allowance is well-managed, and yield is the priority.

• Review reserves jointly with tin (mint fee) and dynamic redemption fee settings to maintain consistent peg behavior and treasury runway.