Operational Requirements

Off-chain rules

The constraints in this section are NOT enforced on-chain. Prediction market liquidity is not measurable on-chain. These are critical operational rules that determine whether the system is viable. Failure to follow them undermines the protocol's pricing assumptions and can result in phantom NAV based on illiquid positions.

Why Off-Chain Rules Matter

The Vault-K-NO's pricing model relies on prediction market prices being real and liquid. If the vault holds too large a fraction of a market's open interest, the market price reported by the adapter reflects the vault's own presence rather than independent price discovery. This corrupts the NAV calculation and makes the redemption curve meaningless.

Operator's Responsibility

The operator must: 1. Screen every market against all selection criteria before opening a position 2. Document the independence assessment for every market pair 3. Communicate deviations (delayed redeployment, idle slots) to stakeholders 4. Monitor positions continuously for probability shifts that require rebase

Sections

Section	Contents
Market Selection	Liquidity depth, position limits, time to resolution, entry price range, correlation
Position Sizing	How to compute max allocation per slot
TVL Scaling Limits	Vault size vs. available market depth
Maturity Staggering	Settlement timing rules
Redeployment Timing	Post-settlement window
Slippage Budget	Entry and exit slippage limits
Venue Risk	Prediction market venue dependencies