121. How do we understand the “negative feedback mechanism in automatic control systems”?

Answer: The first thing to realize is that we have set the value of the DW20 stablecoin and the collateral bitcoin-issued DW20 coins at $1. It is a reasonable psychological cue and a steady state maintained by the negative feedback mechanism. Then, the negative feedback mechanism will be specifically reflected in the adjustment process of the DW20 value. When the DW20 value is greater than 1 U.S. dollar, the demand is greater than the supply. Then, market participants will automatically issue DW20 coins as collateral to achieve arbitrage and increase market supply. , and then the DW20 value returns to 1 U.S. dollar. The same applies when the value of DW20 is less than 1 U.S. dollar. Arbitrage eventually leads to an increase in coin value, and market participants spontaneously carry out this process. It is the negative feedback mechanism in the automatic control system.

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