Purchasing Power Protection: The Holy Grail of Currency
Maintaining purchasing power is equally important to businesses and individual users. Today, traditional fiat currencies, stablecoins pegged against fiat currency and even future digital currencies created by a government, can all suffer from a loss of purchasing power due to inflation.
For example, $100 in fiat currency with a traditional inflation rate of 3% per year, will only have $74.41 of purchasing power in ten years time. Element Zero stablecoins solve the problem of how to stabilize purchasing power and protects against inflation and market volatility.
Element Zero’s stablecoins face value will be fixed at $100 US and will remain equal to the purchasing power of $100, even in 10, 20, 30 years, because it is protected from inflation and even USD volatility.
Since 1930, the average life expectancy has increased by more than 15 years and recent studies reveal that each year we live, we actually increase our life expectancy. This increased life expectancy improves the chances for a successful retirement, and also offers more years in retirement and opportunities to enjoy the things that “we never had time for before.” The downside is that the longer we live, the longer we will need to live off of our retirement savings.
For example, over the past 100 years, inflation has averaged about three percent every year. At first glance, this might not seem significant. However, three percent inflation over 10 years means a 26 percent loss in the real value of fiat based holdings.
Source: Data from World Bank
Someone once said that “while living longer is generally a very good thing, living longer than your money is not.” None of us know how long we will spend in retirement, which makes it very difficult to navigate when it comes to retirement planning. Think of planning for the future based on a moving target. Another major component to account for is the effect inflation has on retirement savings and effective ways to mitigate it.
The Element Zero machine learning mechanism’s task is to ensure there are enough funds in the Liquidity Reserve to serve the Liquidity Coverage Ratio (LCR). When extra funds exist, they will be moved to the Holding Reserve to be used for purchasing and holding commercial real estate asset tokens via Jointer.io’s decentralized system. This means that when a cryptocurrency market’s volatility reaches an extreme high, the Holding Reserve’s performance will not be affected since its funds are invested in a strong conservative class asset. This also provides protection against inflation, since inflation impacts rent rates. When rent rates increase, the property’s net income and the property value follow.
Countries such as Venezuela and Argentina have fiat currencies in great turmoil. They have high volatility, hyper-inflation, depreciation, and/or weakness against the US dollar. Due to its high stability and continual protection against inflation, Element Zero stablecoins have the opportunity to become a safe haven currency. They are stable enough to keep their value, particularly when compared to other currencies in times of economic uncertainty, high volatility, inflation, and other forms of crisis. This supports the potential for mass adoption by foreign consumers, investors, and institutions that see the strong confidence shown by the Element Zero our stablecoins, recognizing they are both stable and inflation proof.
Element Zero’s protocol is designed to increase the value of its stablecoins in a way that will balance its purchasing power by overcoming inflation. This is achieved through automatically following the Personal Consumption Expenditures (PCE) and the Consumer Price Index (CPI) average inflation per year over the last 100 years—whichever is higher. This design is what will combat the extreme scenarios of temporary hyper-inflation crises.
As Element Zero’s stablecoins establish as a reliable and preferred massive payment solution, we can independently—and in a decentralized manner—measure the CPI inflation rate over time by analyzing users’ expenditures through using Element Zero’s CartBox.
To guarantee a stablecoin's price reflects inflation, every time the system generates new stablecoins, they will be based on a new current coin price, which includes an inflationary adjustment. Every time the system processes a redemption, users receive the current coin sale price. For example, if the stablecoin is worth $100 today and one year later the system creates new stablecoins at a current coin price of $103, users wanting to redeem their stablecoins from the system will receive a return with the new coin at a price of $103.
To ensure that Element Zero stablecoins are not losing value due to USD volatility, the system will measure the SDR (Special Drawing Rights) index, which is determined by summing the values in U.S. dollars, based on market exchange rates of a basket of major currencies, including the U.S. dollar, Euro, Japanese Yen, Pound Sterling and the Chinese Renminbi. The SDR currency value is calculated daily by the International Monetary Fund and the valuation basket is reviewed and adjusted every five years.
Stablecoins that are not based on the centralized and fiat-collateralized method (meaning they have no 1:1 reserve ratio with fiat) face a significant problem. They cannot be successful and trusted as a stablecoin until a large user base accepts them as such, but mass adoption will not occur until they are first trusted. The only way to avoid this "Catch 22” is by creating significant incentives for first-time adopters.
Element Zero’s growth strategy to drive mass adoption is multi-pronged, providing multiple pathways to the usage of Element Zero stablecoins globally.
ELEMENT ZERO PARTNERSHIP PROGRAM
- Phase 1
- Pilot program for stablecoin creators
- Phase 2
- Strategic partner management
- Automated on-boarding program for smaller players
ELEMENT ZERO PARTNERSHIP PROGRAM
Stablecoin word of mouth and social media promoters
ELEMENT ZERO PAYMENT GATEWAY CHANNEL DEVELOPMENT
Merchants - Element Zero stablecoin accepted here Payment Gateways - Integration to existing payment options
ELEMENT ZERO STO
From an economic perspective, the value of mass adoption lies in leveraging money in multiple ways, just like today's banks do. Element Zero will launch its’ own stablecoin, the EZO coin, to provide widespread access to the payment network and stablecoin solution. Element Zero will leverage the EZO coin as a vehicle to drive mass awareness and adoption by offering discounts and other incentives during the STO to promote widespread use.
