Priority Claims

Priority claims are specific legal or contractual rights that grant a participant the first right to receive payment or recover assets from a debtor. In the world of derivatives and lending, these claims are essential for establishing the hierarchy of payments during distress.

A priority claimant has the right to be paid in full before any subordinate claimant receives a single cent. This status is often secured by collateral or by the explicit terms of a smart contract governing the transaction.

In crypto, priority is enforced through immutable code rather than traditional legal systems, making it highly efficient but also rigid. Understanding who holds priority is the first step in assessing the risk of any financial instrument.

It defines the boundaries of loss for different classes of investors.