Stablecoin design analysis- Part 4: Volatility-free EZO hybrid
In the previous sections of this series, we covered three major stablecoin models: the centralized/fiat collateral model, the decentralized/crypto collateral model, and the decentralized/no collateral model. Each of these models has something unique to offer that is designed to target and minimize the volatility in the cryptocurrency industry. For the most part, developers in the cryptocurrency industry have produced products that have used these types of stablecoin designs to craft their own digital currencies. For example, Facebook’s Libra is a centralized model that is pegged to multiple currencies, and will still have volatility.
One company, however, has decided to break away from traditional models and to take sections of various models in order to come up with a stablecoin that would provide a better product for the general product, free from control and centralization. In this section, we are going to cover the volatility free hybrid and the benefits and potential shortcomings it provides users. More specifically, we want to cover how the Element Zero coin functions and what it will be able to do for you.
What Stablecoin Model Does Element Zero Utilize?
The Element Zero stablecoin and platform understands that each of the stablecoin models come with their share of benefits and disadvantages and, as such, it utilizes a decentralized hybrid collateral/non-collateral system that takes some of the best qualities of each in order to create a stablecoin with strong liquidity that can maintain its price and counteract the negative effects commonly experienced in the market. To gain a better understanding of how this system works, let’s take a closer look at this platform.
Element Zero was created out of a need for Jointer.io to have a truly decentralized stable form of payment for their platform.
The Hybrid Decentralized Collateral/No Collateral System
Put simply, Element Zero uses a decentralized collateral/no collateral that manages to overcome the demand issues we see in collateralized systems. All the while, preventing the system from facing the disasters that could happen if the system is overloaded with requests in the event too many people are looking to sell their stablecoins at the same time. Having too much demand or too little demand are both volatile situations for a stablecoin project and Element Zero can successfully sidestep these issues with their hybrid system. Further broken down, Element Zero maintains liquidity by…
● Consistently monitoring the performance of other currencies and tracking inflation via API’s, measuring the Liquidity Reserve against the U.S. dollar based on multiple leading exchanges that follow the median buy and sell rates listed on these exchanges. It will also maintain liquidity by evaluating the BTC and ETH micro-trades and pricing and through the use of the Personal Consumption Expenditures Index and the Consumer Price Index, providing the platform with a multi-market assessment that is extremely comprehensive.
● Maintaining a value locked price of $100 that eliminates the fear or panic that accompanies volatile cryptocurrencies and high demand. The value of EZO will increase with inflation
● Users who want to sell or redeem their stablecoins will be able to do so at any given time, without the fear or panic that comes with high supply.
● Rather than processing redemption orders on a first-come-first-serve basis, which can be unfair to users who simply are not quick enough to beat out other faster users or those attempting to cheat the system, orders will be filled on a pro-rata basis once every 24 hours.
● There is a circuit breaker mechanism that activates slow and halt trading mechanisms when coins such as BTC and ETH start to appreciate and trading increases. When this happens, it can indicate that there is more demand for regular cryptocurrencies and less demand for stablecoins, especially if there is a large jump in price and a desire to invest and profit from cryptocurrencies. This will give users the opportunity to trade in their stablecoins and will protect the system from too many requests at once.
Using all of these mechanisms and systems of checks and balances, the system is able to maintain and protect itself from the many dangers that come from other stablecoin projects. Over time, the reserve will grow as well and provide additional assurance that the project can handle the volume of requests and still have plenty to back up the system as it continues to grow. While there are additional mechanisms that this platform uses that we have not listed here, those presented truly make Element Zero stand out from other stablecoin projects. By helping it function as a stablecoin that users can rely on as they seek out a digital currency that can act as a store of value and provide more longevity than some of the other existing cryptocurrency projects to date.
- No Currency, Commodity or Collateral Needed
- Inflation Protection Against USD Volatility
- An open-source, turn-key platform
- Not-for-profit status
As you can see from the evidence provided above, a hybrid stablecoin model is far more efficient than simply using one of the other three models we listed in this series by themselves and Element Zero has leveraged this truth in their favour by creating a great hybrid stablecoin product that provides the best benefits of other cryptocurrency models. The project currently as the beta version of token available for users. This beta version also shows their free SmartSwap and maintains a fixed $100 value, unlike the EZO token which will increase with inflation. I and other hackers are currently in TestNet trying to manipulate the price. After 3 months, we are still unable to do so.