How Elasticity Works

The particular subject I’ll be discussing in this article, revolves around economics, and the ever slow slightly existing yet expanding theories of elasticity that exist upon blockchain technology. This term has been repeated in your average high school economics class, or was more or less explained in detail throughout a university program of your choosing, yet it exists beyond the classroom in more important ways than one.

When it comes to finance in the blockchain world, the core contribution of elasticity is more or less aligned with how the value of the currency reacts to fixed markets that interact with smart contracts to facilitate certain transactions undergoing within various cryptocurrencies, for which the ones we’ll be mentioning today are Ethereum and Bitcoin. Respectively, there are other currencies out there with mentioned elasticity, for which we’ll be mentioning those in each of their isolated workshops, but for now the case will be that we’ll establish the topic on these core topics.

Since every currency and its developers have created a particular supply, for which some states in the US are limited to selling a certain percentage of that at a time, using an ecosystem such as the CoT, or Communication of Things, these supplies are maintained within data exchanges at the support of devices and services share information about transactions across public sectors so to speak. Whether it’s healthcare, transportation, or other developing public infrastructure, communication like it is facilitated in a decentralized network is upmost important in optimal activities that are always coinciding with finance.

As previously discussed, not all currencies are the same, some are established with its value remaining volatile depending on demand, while others are being traded indirectly on the NASDAQ, and are backed up by fiat currency. Elasticity at its core will be defined with volatility, with nothing more or anything less.

Volatility and elasticity both emerge together in a cryptocurrency when, the certain volume of currencies exchanged throughout different phases of a market, whether or not it’s an upmarket day where a higher use of energy cost units exhibits the need for investors to seek arbitrage opportunities, but what is that and why do they do this?

When large volumes of currencies are traded, there is the need for the average investor to assure of themselves that the currency has its value at the best interest of whoever is trading that particular percentage of the supply. Think of it like a normal stock, it gets thrown around traditionally that you must buy low, and sell high, and investors praise that tactic in cryptocurrency with the rationale that when there’s higher traffic in trading, energy costs dictate whether or not the investor seeks the opportunity to interact with the same supply of tokens with differing volumes.

They could be looking at the value of a currency, and then race to buy the token and sell it at a higher value in a rare case at which the token is managed by a high level of inflow and outflow volumes. Inflow being that, the cost of energy involved with maintaining or facilitating a cryptocurrency must uphold some equivalency in its return in value, otherwise there is more loss than there is profit, since the cost of spending energy for mining and selling and cryptocurrencies in exchanges starts to create an imbalance in risk and return.

Investors seek to make maximum profit, and that’s where the arbitrage opportunity starts to expand into different strategies that take advantage of rare market cases, where two assets have differing prices. This is where the outflow of the currencies markets come in, or a situation at which, at the support of a regulated token supply, currencies are kept at a stable value because they’re scaled to the point at which they under something called selling pressure.

In the case of a currency being under selling pressure, the regulated supply is kept at certain average values depending on the overall activity of the market itself, which comes in the phases of being at a positive or negative price elasticity, observed during down-market or up-market days. In a down-market, as the term suggests, the assets being traded regardless of whether or not it takes place in parallel blockchains or indirectly on official markets, are low in value generally speaking yet higher on other days.

Keep in mind, I mentioned the term ‘average’, which is important because currencies hold themselves at a reputation due to their prolonged volatility. For example, Bitcoin is generally known to have a negative price elasticity, simply because factors such as selling pressure as well as incredibly high energy costs lead to more constrained segments at which the supply and the traffic behind the token is simply dependent on how much it’s being discussed, positively.

If you haven’t noticed yet, volatility is understood differently in currencies, simply because market phases of the tokens themselves are dictated by, simply the user. There is no central server, with a company behind it so to speak, running whatever may be happening, it’s simply the elasticity of the person, and not the existing product.

How much it exists varies between countries, since known exchanges that were once held reliable, such as Binance, has faced money laundering charges under the conditions at which finances were being embezzled under assets rendered unofficial by the government, since the initial existence of the corporation was held overseas.

Going back to the discussion of negative and positive elasticity, there is no defined state of the currency since it’s all based on the market movement, not unless we speak of transaction fees. Since this is the one way of profitability for currency exchanges, there is a fixed state at which the traffic of the exchange and the communication between transaction fees within the CoT ecosystem, is holistically determined to put BTC at a negative market pressure while ETH is held at a more positive spectrum.

Why is this? Well, simply put, the higher accumulation of these fees become a pressure point for currencies that demand much higher energy costs depending on the efficiency of algorithm, the type of smart contracts set in place, and ultimately if the cost of the energy used is saved or expended excessively based on Proof of Work or Proof of Stake protocols.

So, the conclusion to make here is, accumulation, high traffic, and older systems tend to create negative elasticity for currencies, heightening volatilities, establishing critical selling pressures especially on down-market days, and ultimately putting the investor at a high risk of either seeking to arbitrage their profits spending or to simply take advantage of the temporary time at which the currency remains stable, which is not always the case.

Bitcoin is becoming a more or less older currency, whereas Vitalik Buterin, the creator of the Ethereum brown paper is lasting to improve the tokens format. This brings us to another question, what is the next step for how elasticity is predetermined in an average market where cryptocurrencies have become part of its definition thanks to the evolving world of information technology?

Well, in simpler terms, paradigms in the tech world focused on the Internet of Things resources, cloud computing, and specific focuses on utilization in computer resources establish an information rhetoric bound to enforce newer and more powerful methods of upholding token supplies heightening and establishing at the rate of their uses.

At this point, we enter the discussion of elastic supply tokens, the higher magnitude of loss for most investors who have put their money into this idea, but what is it we’re discussing? An elastic supply token is simply a largely fluctuating token, that goes adapts the buy high and sell low mentality for lesser experienced investors.

In this case, what’s perceived to be a profitable token ends up being marginalized thanks to not only market volatility of the altcoin, but also something called a rebase. A rebase occurs when the supply of a token ultimately controls the price of the tokens that are set in place, in order to set a default value of the cryptocurrency in any such case that markets undergo their down and up times.

It’s no different than how it’s usually done in a stock market, where to manage incoming new products and traffic, algorithmically the stocks are set to decrease or increase above an initial value. For this reason alone, the elastic supply tokens is more or less an example of market volatility, rather than a promising opportunity to enter elastic environments.

But, how does this token specifically relate to the next generation of efficiency in cryptocurrency and blockchain technology? Mentioning the ongoing development in Ethereum once more, protocols for digital assets such as the AMPL (Ampleforth Price Chart) is set in place for ETH in order to create a unique elastic supply so to speak, at which rebasing is boiled down to maintain an average asset backed by cryptocurrency with equating values to the US dollar.

We’ve mentioned stablecoins many times, and this is one way at which Ethereum tries create a stronghold for them, by developing smarter protocols that develop matching values between cryptocurrencies and their corresponding realistically traded values, which for the most part is the US dollar which the government can identify.

Of course, outside of this, cloud computing will help us scale performance in a decentralized world by adjusting their resources to the division of multi-architectural cloud databases, by provisioning and de-provisioning market traffic resources. For example, there are models such as the ‘pay-as-you-grow’ model, which scales performance for elastic supplies of tokens depending on products used in CoT ecosystems.

This is done by making use of agreements, such as the SLA, or service-level agreement, which sets an expectation at which the customer and the service they’re communicating remain transparent about discussions regarding quality of the product. Communication, regardless of whether or not there is need of profitability by an investor in a highly-trafficked market of currencies, or how that’s maintained within a product between the customer and the service provider, is incredibly important and will only be prioritized highly as we transition in a world where artificial intelligence is preoccupying some of those strategies for communication for us.