Waterfall

Full Definition

The Waterfall is the predefined priority structure that governs how revenue flows through a Sails.to offering. When income enters the Operating Series, it does not sit in a pool waiting for someone to decide where it goes. It flows — automatically, programmatically, inevitably — through the waterfall in strict priority order:

1. Senior Debt Holders: Any senior obligations are satisfied first
2. Investor Distributions: Pro-rata payments to all token holders based on their proportional ownership
3. Platform Fee: 1% to the Sails.to platform
4. Excess to Treasury Series: Any remaining revenue flows to the offering's treasury reserve

This waterfall is encoded in the sails_distributions smart contract and enforced on-chain. The order cannot be altered, resequenced, or overridden after deployment.

Why It Matters

In traditional fund structures, the waterfall exists in a legal document. The fund manager executes it. Investors trust that the manager follows the document. History is littered with examples of that trust being violated — fees taken before investors are paid, reserves raided, priority structures quietly reinterpreted.

On Sails.to, the waterfall is not a document. It is code. The Paying Agent executes distributions under Trustee oversight, but neither can alter the priority order. Investors are paid before the platform takes its fee. The platform takes its fee before excess reaches the treasury. This is not a promise. It is a mathematical certainty enforced by Solana.

How It Works

1. Revenue enters the Operating Series from the underlying asset or business
2. The sails_distributions program reads the waterfall configuration from the offering's PDA accounts
3. Senior obligations are calculated and reserved from the available balance
4. Investor distributions are computed pro-rata based on the real-time cap table
5. Platform fee (1%) is deducted from remaining revenue
6. Any excess flows to the Treasury Series for reserve accumulation
7. All payments execute atomically — every step succeeds or none do

Every waterfall execution creates an immutable DistributionRecord on-chain. The audit trail is permanent.

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