Algorithmic Stability Protocol
Element Zero does not use a currency peg or collateral or any predicting method to ensure stability. Element Zero’s stability protocol it is based on a smart contract algorithm that is designed to completely eliminate the possibility for any volatility in the first place. This is achieved by preventing the user from selling the stablecoin above or below the current (fixed) face value. Unlike all other cryptocurrencies that can process a one-way transaction, this protocol is designed to process a two way transaction. On one side the sender can send a stablecoin to a receiver but on the other side the receiver must send back in return cryptocurrency or, an invoice or receipt with same value as the stablecoin. In the event that the value of the exchange does not match, the smart contract steps in to balance the face value between the sender and the receiver by returning the extra value to whom it belongs. The two-way nature of the smart contract means that the Element Zero stablecoin cannot be traded speculatively, since it’s value is enforced.
For example, if user A pays $80 using cryptocurrency such as Bitcoin or ETH to purchase from user B Element Zero stablecoins at $100 fixed face value, the smart contract will send to user A only 80% of the stablecoins ($80/$100), the remaining 20% will be returned back to user B’s wallet. The smart contracts work the same way when using the stablecoin to buy goods and services; the invoice or the receipt for goods and services must be equivalent to the fixed face value of the Element Zero stablecoins, if they do not match the smart contract will adjust to ensure that they do.
There is a +/-5% built-in buffer to account for small changes in the stablecoins value due to inflation. This simply means that the smart contract will not apply any changes as long as the transaction stays within this +/-5% range.
To further protect the system from abuse, the smart contract will implement a payload method function that runs across blockchain networks. This acts in the same way as an attachment on an email. Each block in the transaction chain will have an attachment or “payload.” The information contained in the payload will be similar to the amount, receipt or invoice. This payload will allow a smart contract to verify and confirm the transaction for trade, goods and services are equal to the face value of the stablecoins being sent.
Two-way Transaction
