Introduction
As history has already reported, once a stablecoin becomes tradable on secondary exchanges, the forces of supply and demand unleash enormous volatility on the underlying price, thus defying the very purpose of a stablecoin. There are two ways for any stablecoin to manage—or prevent—this volatility:
- Design and implement creative internal protocols to work toward coin stabilization.
- Completely eliminate all possibility for the stablecoin to fluctuate in the first place.
Element Zero believes that no matter how other stablecoins design and implement their protocols to manage stability, they cannot anticipate all possible market conditions. The future is unpredictable and as it is often said, “we don’t know, what we don’t know.” The logical conclusion is that if there is a potential for price volatility, there will always be risk that the stability models will not cover all market fluctuations and fail, causing the coin’s price to collapse. Furthermore, in the future, competitors, companies, and even nation states may turn their focus on economic warfare as an alternative to traditional combat. This will make destabilizing stablecoins an attractive weakness and used to target businesses and even the economies of other countries. Element Zero is designed to overcome this very weakness.
Element Zero has been built to serve the public for many years to come. But, because no one can know the future, Element Zero cannot and will not claim, like other stablecoin companies, that it has constructed the perfect protocol that could stabilize Element Zero’s stablecoins forever. Stablecoins may still remain vulnerable to price volatility and require the intervention of a small group of people to make multiple decisions for years to come. Element Zero has therefore chosen to build a stablecoin in a way that eliminates the possibility for price volatility in the first place.
We are sure that there will be critics who claim that this new method for eliminating the possibility for price volatility will not allow people the choice to sell their stablecoin above or below the set price and that this runs against the idea of a free market. However, any decentralized system must be designed as autonomous and not dependent on a committee of individuals to brainstorm and change policy, if and when extreme conditions transpire. Therefore, those stablecoins that are pegged against fiat money (such as U.S. dollars, euros, pounds, yen, etc.) that use a committee to monitor their coins also do not support free market principles. The truth is there is no such thing as a free market. So, the only question is whether a decentralized system or a centralized system controlled by a small group of people who make decisions for all. Since Element Zero’s stablecoin is designed to overcome inflation and stabilize its purchasing power, the value of our stablecoins will follow and change based on public economic behavior, a datum which we believe itself expresses the true spirit of a free market.
Elements Zero’s liquidity system is a hybrid collateralization and non-collateralization system with Machine Learning, Circuit Breakers and Bond Tokens (read more about Circuit Breakers and Bond Tokens later on) to ensure immediate liquidity and optimize its reserves based on Fractional Reserve Multiplier Effect method (read more at Investopedia). This kind of liquidity system supports a strong level of trust among users and promotes the development of a significant secondary market. Element Zero also encourages the use of its stablecoins for goods and service transactions using their integrated escrow and arbitration features along with a new disruptive method for processing payments.
All current stablecoins are based solely on pre-determined protocols that are inadequate, flawed and at risk of failure. Element Zero utilizes a new approach, combining proven economic protocols to create the stability and liquidity that finally solves the stablecoin problem. Our approach provides a foundation that supports both user confidence and long-term investment.
- A Next Generation Payment Process - a new way to process payments over the web and VR/MR/AR and other emerging platforms.
- A Decentralized Stability Protocol - based on a new algorithmic methodology that eliminates the ability to sell Element Zero stablecoins above or below the set price, and is designed to overcome inflation;
- A Decentralized Liquidity Protocol - based on a new methodology to survive cryptocurrency crises through the use of a hybrid collateralized/non-collateralized protocol, dynamically managed by machine learning based on the Fractional Reserve Multiplier Effect, the same method used by modern banks to create liquidity
