When a loan loses money, who takes the hit first?
At Forest Road Vault, losses follow a defined cascade:
Curator first-loss capital
sGROVE backstop
sUSDfr principal
Each layer absorbs losses before the next one is reached.
That matters because alignment is stronger when the capital closest to underwriting stands in front of depositor capital.
The structure doesn’t eliminate credit risk.
It defines who bears it, and in what order.