Import/Export Limits
Export limits for participating networks are set as a function of a network’s capacity to carry export debt. Since export debt, like member debt, increases the circulating Stable Credit supply, a network’s export debt ceiling is set below a value that would inflict felt inflationary pressures. “Felt inflationary pressures” for the purpose of this calculation are defined as potential price increases of up to 5%. Consequently, a networks Debt Ceiling is resolved for using the following formula:
Where:
M denotes a networks Stable Credit supply
V a network’s trading velocity
P the average size of Stable Credit transactions
Q quantity of tx's.
Import limits for participating networks are set as a function of a network’s demonstrated capacity to export. This means that when a new network joins the Clearing House, its members are temporarily barred from importing, but can export their goods and services to counterparty networks. The new network’s import limit is then dynamically adjusted to reflect its actual exports.
A new network that has exported an accumulated value of 1000 would consequently have a positive BoT balance of 1000. This would then translate into a negative BoT limit of -1000, granting the new network’s members a total of 2000 to import (the accumulated positive balance + the assigned import limit).
Limits at Seeding Phase
When a new Clearing House is established, its founding networks need to have temporary artificial import limits assigned. This is the case since import limits are set as a function of actual exports, and since no one has yet exported, all participating member networks lack import capacity - which results in zero liquidity for trades.
To avoid this, new instances of the Clearing House assign networks with temporary import levels, equal to half the size of their export limits. This allows for the liquidity required for trade to be available. Once networks utilize this assigned liquidity, the Clearing House records their actual exports and adjusts their import capacity accordingly over time. Note that while establishing a new Clearing House requires a degree of trust among its founding networks, after the seeding phase, new networks can join in a trustless and permissionless manner.
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