Dynamic Adjustment

Definition ∞ Dynamic Adjustment describes a system’s capability to automatically modify its operational parameters or rules in response to changing internal or external conditions. This mechanism is designed to maintain system equilibrium, optimize performance, or react to environmental shifts without manual intervention. It allows protocols to remain adaptable and resilient in variable environments. This adaptability is a key feature of many advanced digital systems.
Context ∞ Many decentralized protocols incorporate dynamic adjustment mechanisms for elements such as interest rates, collateral ratios, or transaction fees. These adjustments aim to preserve protocol stability, optimize resource allocation, or react to market volatility in real-time. Monitoring these adjustments provides valuable insight into a protocol’s health, its responsiveness to market events, and its overall economic model.