Backing Is Not Gross Exposure
Why a larger productive position does not create additional reserve backing.
What is it?
Net Reserve measures backing. Gross Productive Exposure measures the total market position after reserve leverage.
Why does it exist?
Keeping the two values separate prevents borrowed or synthetic capacity from being described as additional backing.
How does it work economically?
A reserve with $1 million of backing, $1 million of additional capacity, and $2 million of Gross Exposure operates at 2×. Backing remains $1 million before profit or loss.
Reserve leverage increases productive exposure of the reserve — not the number of tokens held by users. Gross Exposure is not additional backing.
What does the user see?
The balance sheet shows $1M Net Reserve, +$1M Additional Capacity, =$2M Gross Exposure, and 2× Reserve Leverage as four explicit values.
Worked example
Net Reserve / backing$1,000,000
Additional capacity$1,000,000
Gross Productive Exposure$2,000,000
Reserve Leverage2.0×
The second $1 million is exposure capacity. It is not backing and does not increase token-holder redemption rights.
What can go wrong?
Losses apply across the gross position and can reduce the $1 million Net Reserve faster. Exposure may need to be reduced under stressed collateral or liquidity.
Metrics that prove it
Net Reserve: $1MDefinition, source, and current value.—
Additional Capacity: $1MDefinition, source, and current value.—
Gross Exposure: $2MDefinition, source, and current value.—
Reserve Leverage: 2×Definition, source, and current value.—
Unrealized P&LDefinition, source, and current value.—