Paper: arXiv 2610.02834

Authors: Maksym Nechepurenko

Abstract

A modular leveraged event-market protocol can contain individually correct contracts for risk approval, positions, debt, settlement evidence, credit pools, junior backstops, reserves, liquidation, and governance while still lacking one authoritative financial execution path. This paper develops a canonical protocol graph in which every financial domain has one storage authority and composition components coordinate transitions without recreating balances, debt, positions, evidence receipts, queues, reserves, pause state, or terminal scenario state. The architecture formalizes atomic position origination, a settlement-confirmed debt saga, trader residual release, an ordered reserve-backstop-Senior loss waterfall, loss-participating withdrawal queues, capability-conditioned execution, protocol-wide pause and timelocked recovery, deterministic deployment manifests, canonical state projection, and exactly-once reconstruction after a chain-confirmed checkpoint. We prove composition-level authority uniqueness, atomic closure, loss conservation and priority, receipt-idempotent settlement, legal no-go safety, capability-transition safety, and no-financial-reexecution recovery under explicit assumptions. The implementation is evaluated through twelve parent Financial Interaction Assertions (FIA-001-FIA-012), including mandatory FIA-011A/B capability subcases. The registered local cohort contains twelve uniquely correlated scenario records and 84 retained ACTUAL_EVIDENCE layer positions, two clean materializations with one byte-identical file index, a deterministic strict archive accepted by a separate verifier, and a selected ordered replay bound to that archive. The result connects the formal protocol graph to a reproducible evidence chain while preserving explicit boundaries between the observed engineering result and future external-operation hypotheses.

Complexity vs Empirical Score

  • Math Complexity: 7.0/10
  • Empirical Rigor: 8.0/10
  • Quadrant: Holy Grail — high math complexity, high empirical rigor

Why this score: This paper presents a highly rigorous and novel approach to designing robust leveraged event markets on-chain. The mathematical formalisms for state authority, composition, and recovery are well-defined, and the empirical evaluation through detailed FIA scenarios and a reproducible evidence chain is very strong. The work addresses a critical architectural problem in decentralized finance with significant depth.

Research Flowchart

  flowchart TD
    A[Research Goal: Develop a Canonical Protocol-Graph for Leveraged Event Markets] --> B{Methodology: Formalizing Protocol Architecture & Proving Properties};
    B --> C[Inputs: Individual Financial Domain Contracts, Protocol Graph Composition Rules];
    C --> D{Computational Process: Implementation Evaluation via Financial Interaction Assertions (FIA)};
    D --> E[Outcomes: Unique Authority, Atomic Closure, Loss Conservation, Exactly-Once Recovery, Reproducible Evidence Chain];