How Does This Adjustment Mechanism Prevent Fee Spikes?
The base fee adjustment mechanism prevents extreme fee spikes by ensuring that the fee only changes gradually (max 12.5% per block) and by allowing the block size to temporarily double during periods of high demand. This 'elastic' block size absorbs demand surges, preventing a rapid, competitive bidding war that characterized the old auction system.
Glossar
Pricing Model Adjustment
Adjustment ⎊ Pricing Model Adjustment refers to the systematic modification of a derivative valuation framework's parameters or functional form to better align theoretical prices with observed market quotes.
Fee Market Adjustment
Dynamic ⎊ Fee market adjustment refers to the real-time fluctuation of transaction costs in response to network congestion and block space availability.
Active Margin Adjustment
Management ⎊ Active margin adjustment is a critical risk management technique used by traders to dynamically control their exposure.
Slippage Parameter Adjustment
Parameter ⎊ Adjustment ⎊ Control ⎊ Slippage Parameter Adjustment involves the tactical modification of the maximum acceptable price deviation allowed for an automated order execution.
Time Based Price Adjustment
Adjustment ⎊ This refers to the systematic modification of a derivative contract's settlement price or notional value based on a predetermined schedule related to the passage of time.
Difficulty Adjustment Explanation
Adjustment ⎊ Difficulty adjustment is a core mechanism in Proof-of-Work blockchains designed to maintain a consistent block production rate.
Margin Requirement Spikes
Volatility ⎊ Margin requirement spikes represent sudden, significant increases in the collateral needed to maintain open derivatives positions.
Dynamic Quote Adjustment
Calibration ⎊ Dynamic Quote Adjustment within cryptocurrency derivatives represents a real-time modification of pricing parameters, responding to shifts in underlying asset volatility and order book dynamics.
Volatility Spikes Prevention
Prevention ⎊ : Volatility Spikes Prevention encompasses the set of proactive strategies and systemic safeguards intended to dampen extreme, sudden increases in implied or realized volatility within crypto derivatives markets.
Decentralized Adjustment System
Algorithm ⎊ A Decentralized Adjustment System is governed by a pre-programmed algorithm that dictates how protocol parameters change in response to observed on-chain conditions, such as block time or utilization rates.