Appendix D - Transitional Behavior and System Robustness
This appendix addresses non-ideal behavior during early adoption of a Unit of Fixed Denominator (UFD), particularly price adjustments driven by settlement currency conditions.
D.1 Scope
This appendix does not prescribe ideal behavior. It analyzes system behavior under realistic, imperfect conditions.
D.2 Expected Transitional Reactions
During early adoption, some merchants may adjust prices measured in UFD in response to fluctuations in settlement currencies.
This behavior typically arises from:
legacy conditioning to fiat-denominated cash flow
short-term liquidity pressure
uncertainty during initial implementation
Such reactions are expected and do not represent a system failure.
D.3 System Tolerance
The UFD framework is structurally robust to non-ideal usage.
A merchant may:
temporarily adjust UFD prices due to settlement concerns
conflate pricing and cash management during transition
In these cases:
the system remains operational
transactions remain consistent
no systemic contradiction arises
The unit of account continues to function as a measuring scale, even if applied imperfectly.
D.4 Degradation Mode
While the system tolerates such behavior, repeated price adjustments driven by settlement volatility introduce informational noise.
Specifically:
prices measured in UFD begin to partially reflect currency conditions
the informational advantage of a fixed denominator is reduced
price signals become less precise, though still more localized than under fiat pricing
This represents gradual degradation, not collapse.
D.5 Localized Error vs. Systemic Error
A key property of UFD is error localization.
Under fiat pricing:
monetary noise propagates system-wide through inflation
Under UFD:
pricing errors remain local to the merchant
causes of adjustment are observable
distortions do not silently propagate
This containment property remains intact even under non-ideal behavior.
D.6 Emergent Selection
Over time, differences in pricing discipline become visible.
Merchants who:
maintain stable UFD prices
adjust only for real changes
tend to exhibit:
greater price predictability
lower repricing frequency
increased customer trust
Merchants who frequently adjust prices in response to currency movements lose these advantages.
This selection emerges without enforcement or coordination.
D.7 Transitional Cost Allocation
In early phases, some adjustment burden shifts from pricing to cash management.
This may include:
temporary margin compression
increased attention to settlement mix
reduced tolerance for currency exposure
These costs are transitional and explicit, rather than hidden through repricing.
D.8 Summary
The UFD system does not require ideal behavior to function. UFD measures prices, not payments.
It tolerates non-ideal usage while preserving its core advantages:
fixed measurement
separation of pricing and settlement
localization of error
Improved behavior is not enforced. It emerges as a competitive and informational advantage.