Market Related Structures: What's a Unit?
u·nit /ˈyo͞onət/ noun: a quantity chosen as a standard in terms of which other quantities may be expressed.
A unit is a placeholder for a block of funds. The dollar value of a single block fluctuates, but the block is still one block.
Imagine an apple tree. The tree is growing 100 apples, and each apple weighs 1 ounce today. All the apples grow and shrink at the same rate so that, at any point in time, all the apples will be exactly the same size.
On day one, 16 apples are plucked from the tree. Since each apple weighs 1 ounce, the apples collectively weigh 1 pound.
In the future, 16 additional apples are plucked. These apples grew over time so that on this day, each apple weighs 1.5 ounces. This second batch of 16 apples weighs 1.5 pounds.
The apple is a unit. Why do we use units and not our normal dollar system? After all, the dollar is a monetary unit that holds a starting value of 100 pennies, and its value grows and shrinks.
Units provide a way to convert a variable dollar into a fixed and determinable payment. Because the unit payments are calculated based on an objective formula, they allow us to satisfy the § 130 requirements. In the example above, the weight of the apples varied, but a fixed and determinable amount of 16 apples were plucked from the tree each time.