Project Deviant · Fault Line Registry v2.0 · with historical entries · 2022–2023 selection

Fault Line
Registry.

A public, append-only record of structural exposures observed in the conventional financial system, paired with the structural properties of mathematically backed assets that render those categories of exposure inapplicable. This edition includes a curated selection of documented historical events as initial entries.

Abstract

What this registry records.

The conventional financial system contains layers of human authority — issuers, custodians, central banks, sanctions authorities — that constitute its load-bearing structure. From time to time, those layers exhibit failure modes that are subsequently documented in regulatory filings, court records, and the press. The registry records such events, names the structural exposure each one made visible, and identifies the property of the MBA construction that renders the same category of exposure absent.

No entry constitutes a claim that any specific event would have been prevented by the MBA construction. The claim is narrower: the structural mechanism that produced the event does not exist in the MBA construction, and therefore the category of failure that the event exemplifies cannot occur by the same mechanism. The reader is invited to verify each entry against the cited public sources and the publicly deployed contract bytecode.

Entries do not assign blame, criticize the actors involved, or express judgment. Authors of the registry may hold private views; the registry does not.

Note to readers in regulatory roles

If you are reading in an official capacity, this note is for you.

This registry is published openly because we believe an honest record serves both observers and authorities better than silence. We hold the institutional roles you occupy in serious regard. The mandate to protect investors, depositors, and the orderly functioning of markets is a genuine one, and we make no argument against it.

The entries below are not assertions that the MBA construction is preferable to instruments under your jurisdiction. They are observations: each documented event involved a structural dependency; the MBA construction does not contain that dependency; the same category of failure therefore cannot occur in the MBA construction by the same mechanism. The contrast is a property of the bytecode, not a claim of superiority.

We are available to discuss the technical construction with you on the public record. The bytecode, the deployment history, and the testnet validation snapshots are open for inspection. If clarification of any entry would assist you, the founder address is reachable through the contact channels on the main project page.

Methodology · in brief

Five conditions, all required.

1. Public documentation. Each event is documented in at least two independent public sources — regulatory filings, court records, or mainstream press. Commentary and social media are not sufficient.

2. Factual undisputedness. The basic facts of the event are not in dispute. Disagreement may exist over interpretation; the event itself must be one informed observers describe identically.

3. Structural specificity. The event must exemplify a category of exposure that can be named precisely.

4. MBA-applicable contrast. The MBA construction must possess a property that renders the named exposure absent. Events that expose dependencies present equally in MBA constructions are excluded.

5. Neutrality of language. The entry can be written without assigning blame or expressing judgment. If neutral language is not possible, the event is excluded regardless of relevance.

Entries.

Chronological · oldest first · append-only
2022-05-09
/ 2022-05-12
Algorithmic stablecoin depeg and collapse of associated reserve token
Stablecoin operator
Algorithmic
Event
A dollar-pegged algorithmic stablecoin lost its peg over the course of approximately three days. The associated reserve token, which the stabilization mechanism relied upon for arbitrage-driven price restoration, declined in market value from prior trading ranges to a fraction of one cent within the same period. Holders who attempted to exit the stablecoin during the period received progressively less than the nominal one-dollar redemption value.
Affected layer
Algorithmic stablecoin operator and the associated reserve-token protocol.
Structural exposure
The stablecoin's redemption value was maintained by an arbitrage-driven stabilization mechanism that depended on the continued market value of a separate token. Redemption was not backed by a fixed-rate claim on an underlying asset. When the secondary market for the reserve token became disorderly, the stabilization mechanism could not restore the peg, and the nominal redemption value was not honored.
MBA contrast
The DEA construction does not rely on a stabilization mechanism, arbitrage incentive, or secondary market. Each unit carries its backing BCH inside the UTXO that represents it. Redemption is a standard P2PKH spend that releases the backing satoshis at the fixed rate set at genesis. The category of failure exemplified — peg loss due to a market-dependent stabilization mechanism — is absent because no such mechanism exists in the construction.
Inapplicable to MBA
Yes. The dependency is not present in the bytecode.
Sources SEC Cornerstone Research report on stablecoin events 2022; United States District Court for the Southern District of New York filings in subsequent civil actions; Reuters and Financial Times coverage of the depeg period (May 2022); public block explorer data on the affected protocols.
2022-06-12
/ 2022-07-13
Custodial lending platform pause on withdrawals and subsequent bankruptcy
Custodial lender
Centralized platform
Event
A custodial crypto-lending platform announced a pause on customer withdrawals, swaps, and transfers between accounts, citing extreme market conditions. Approximately one month later, the same entity filed for Chapter 11 bankruptcy protection in the United States Bankruptcy Court for the Southern District of New York. Customer balances became claims in the bankruptcy proceeding rather than withdrawable assets.
Affected layer
Custodial lender holding pooled customer deposits as a counterparty.
Structural exposure
Customer redemption rights depended on the continued solvency and operational discretion of a single custodial counterparty. When the counterparty paused operations and subsequently filed for bankruptcy protection, customer claims to deposited assets transitioned from immediate redemption rights to general unsecured creditor claims, subject to the priority order established by bankruptcy law.
MBA contrast
A DEA holder is not a depositor and there is no custodial counterparty. The backing BCH is held inside the UTXO controlled by the holder, not by any platform, lender, or third party. Redemption is performed by the holder broadcasting a standard transaction signed by their own private key. No party can pause, freeze, or convert the redemption right into a bankruptcy claim, because no party holds the backing.
Inapplicable to MBA
Yes. There is no custodian to become insolvent.
Sources Case No. 22-10964, In re Celsius Network LLC et al., United States Bankruptcy Court for the Southern District of New York; Examiner's report filed January 2023; contemporaneous Reuters and Bloomberg reporting on the withdrawal pause and bankruptcy filing.
2022-08-08
Sanctions designation of autonomous on-chain smart contract addresses
Sanctions authority
Treasury OFAC
Event
The United States Department of the Treasury's Office of Foreign Assets Control designated a set of Ethereum smart contract addresses associated with a privacy-mixing protocol on the Specially Designated Nationals and Blocked Persons list. The designation prohibited U.S. persons from interacting with the listed addresses. The smart contracts themselves continued to execute autonomously, since the bytecode does not have an administrative function to halt operation.
Affected layer
Sanctions-enforcement authority and developers of an autonomous deployed contract.
Structural exposure
The episode illustrated an asymmetry between the addressable parties available to a regulator and the autonomously operating contract. The contract has no party empowered to halt it. Enforcement therefore reached only the secondary parties — developers, interface operators, and end users — while the bytecode continued to execute. Litigation followed concerning the scope of OFAC authority over autonomous code.
MBA contrast
The DEA construction shares the autonomous-contract property the episode described — there is no administrative function, no party to enjoin from operating the contract, and no upgrade path. The contrast is structural rather than oppositional: the same property that complicated enforcement in this case is, in the MBA construction, the same property that prevents the construction from imposing arbitrary changes on its holders. The autonomy cuts in both directions. A holder cannot have their position arbitrarily altered by any party — including the founder.
Inapplicable to MBA
Partially. The MBA construction can be the subject of regulator interest. The MBA construction cannot be the subject of regulator-induced behavioral change at the bytecode level, because no party possesses the authority to alter the bytecode.
Sources U.S. Department of the Treasury Press Release, "U.S. Treasury Sanctions Notorious Virtual Currency Mixer Tornado Cash," August 8, 2022; Van Loon v. Department of the Treasury, United States Court of Appeals for the Fifth Circuit (subsequent litigation); contemporaneous Reuters and Bloomberg coverage.
2022-11-11
Major centralized exchange Chapter 11 filing following liquidity disclosure
Centralized exchange
Custodial platform
Event
One of the largest centralized cryptocurrency exchanges by trading volume filed for Chapter 11 bankruptcy protection following a period of public disclosures concerning the relationship between the exchange's customer-deposit accounts and an affiliated trading firm. Customer withdrawal requests had been suspended in the days preceding the filing. Subsequent reporting by the court-appointed restructuring officer documented commingling of customer funds and material discrepancies in record-keeping.
Affected layer
Centralized exchange operating as custodian of customer deposits and as affiliate of a trading firm.
Structural exposure
Customer holdings were recorded as exchange-side database entries rather than verifiable on-chain positions controlled by the customer. The custodial model permitted internal use of customer assets in ways the customer could not observe on chain. The discrepancy between recorded customer balances and actual asset reserves remained undetectable to customers until the moment withdrawal requests could no longer be honored.
MBA contrast
A DEA holder's position is not a database entry on any platform's ledger. The position is a UTXO on the BCH network, controlled by the holder's private key, observable on any public block explorer, with backing satoshis held within the UTXO itself. There is no custodian whose books can disagree with the on-chain state, because the on-chain state is the position. An exchange listing a DEA does not custody it in any sense relevant to redemption — the holder's redemption right is exercised against the contract, not against the exchange.
Inapplicable to MBA
Yes. There is no custodial layer whose books can diverge from on-chain reality.
Sources Case No. 22-11068, In re FTX Trading Ltd. et al., United States Bankruptcy Court for the District of Delaware; Declaration of John J. Ray III in Support of Chapter 11 Petitions and First Day Pleadings, filed November 17, 2022; Securities and Exchange Commission complaint filed December 2022; contemporaneous Reuters, Bloomberg, and Financial Times reporting.
2023-03-10
Regional commercial bank closure and federal receivership
Commercial bank
Insured deposit institution
Event
A California state regulator closed a regional commercial bank holding deposits substantially in excess of the federal deposit insurance limit applicable to most depositor categories, and the Federal Deposit Insurance Corporation was appointed receiver. Deposit access was temporarily restricted. Federal authorities subsequently invoked a systemic-risk exception to extend protection to uninsured depositors. The bank's stablecoin-issuer customers experienced reserve-asset access disruptions during the period before the exception was announced, with downstream effects on the peg of at least one major dollar-denominated stablecoin.
Affected layer
Commercial bank holding reserve assets for stablecoin issuers; deposit-insurance authority; federal banking regulators.
Structural exposure
The stablecoins affected during the period maintained their peg through reserve assets held at commercial banking partners. The redemption value of the stablecoin therefore depended on the continued operational solvency of the partner bank, the applicable deposit-insurance coverage at that bank, and the willingness of federal authorities to extend extraordinary protection in the event of bank failure. The dependency chain extended at least three layers beyond the stablecoin holder.
MBA contrast
The DEA construction does not hold reserves at a banking partner. The backing for each unit is BCH satoshis held inside the UTXO that represents the unit, on a public network with no commercial-bank intermediary in the redemption path. The redemption path of a DEA holder traverses zero banking institutions and depends on zero deposit-insurance arrangements. A banking event analogous to the one described would have no mechanism by which to affect the DEA holder's redemption right.
Inapplicable to MBA
Yes. There is no banking partner in the redemption path.
Sources Federal Deposit Insurance Corporation Press Release, "FDIC Creates a Deposit Insurance National Bank of Santa Clara to Protect Insured Depositors of Silicon Valley Bank," March 10, 2023; Joint Statement by Treasury, Federal Reserve, and FDIC, March 12, 2023; California Department of Financial Protection and Innovation order taking possession; contemporaneous Reuters, Wall Street Journal, and Financial Times reporting on stablecoin reserve impacts.
Principle

What the registry asserts.

Each entry asserts only what is independently verifiable: the event occurred as described in the cited sources; the structural exposure named is the exposure those sources describe; the contrasting property of the MBA construction is observable in the publicly deployed bytecode. The registry does not assert that the events would have been avoided. It asserts that the mechanism that produced them is absent from the construction.

The registry will continue to be updated as further events meet the inclusion criteria. Entries cannot be removed or modified once published, except to correct a factual error, in which case the correction is recorded as an amendment with its date and reason.

Time will fill it, or it will not. The accumulation is the evidence.