In the world of cryptocurrency, prices of digital assets can be extremely unstable. This makes it hard to use crypto for exchange or storing of value. Rebase Tokens, also known as elastic tokens, are created to address this issue. This article will cover what Rebase Tokens are, how they work and if they might be a good choice for you.
What Are Rebase/Elastic Tokens?
Rebase Tokens are a type of cryptocurrency that adjusts its supply to maintain price stability. This differs from traditional cryptos that are set at a fixed supply at the time of creation.
Rebase Tokens are kept at a price target with a process called “rebase.” This is a signal that is set off at regular intervals, such as every 24 hours. During a rebase, the token supply is changed based on a predetermined formula.
For example, if demand is 10% higher than the last rebase, then the amount of the token will automatically increase by 10%. Conversely, if the demand is lower, the supply of the token will decrease. This is done to ensure that the token’s price remains stable in the face of fluctuations in demand.
How Do Rebase Tokens Actually Work?
It is important to understand that rebase Tokens are powered by smart contracts. Smart contracts are self-executing contracts in which the terms between the buyer and seller are written directly into the code. Smart contracts allow you to automate certain processes like adjusting the supply of tokens in response to changes in demand.
When a rebase Token is created, the smart contract is programmed with a default formula to regulate supply. This formula is usually based on the price target for the token and the current market price.
For instance, if the market price of a token falls below its target price, then the token’s amount will decrease to return it to its original target price. Conversely, if the token’s market price is higher than the target price, the supply of the token will increase.
Rebasing is triggered at regular intervals such as every 24 hours. If a rebase occurs, the smart contract will automatically use the default formula to adjust the token’s supply.
Examples of Rebase Tokens
Let’s look at some examples of rebase Tokens in circulation.
Large (AMPL)
Large (AMPL) is a cryptocurrency that utilizes an elastic supply mechanism. This means that the amount of the token automatically adjusts to keep a stable market price. In the case of Ampleforth, the price target for the token is $1 and is achieved through a process called “rebase” that transpires every 24 hours.
Although Ampleforth claims to be a stablecoin, it is still volatile. This is because the price of individual tokens does not determine the value of the entire network. Instead, it is important to consider the changes in supply caused by the rebasing.
One way to gauge Ampleforth’s success is to look at its market capitalization rather than the individual token prices. Market capitalization measures the total value of a network and can give a better idea of its overall performance.
Ampleforth gained traction through a so-called liquidity mining campaign called Geyser. This token distribution system for participants lasts for 10 years and shows how liquidity incentives can help drive adoption and growth for a decentralized finance project (DeFi).
RMPL
RMPL is a forked cryptocurrency that utilizes an elastic supply mechanism similar to Ampleforth’s. It also includes fair launch and staking. RMPL’s goal is to keep the price steady at $1 per token.
RMPL’s basis change period is activated when the price of the token goes above $1.05 or below $0.95. It can be active for a maximum of 48 hours.
By using random rebasing, RMPL can maintain a fixed price without engaging in price fixing. It is intended to serve as a stable storage of value for dApps and a medium for exchange for peer-to-peer transactions.
YAM Finance
YAM Finance is a cryptocurrency that utilizes an elastic supply mechanism similar to Ampleforth’s. It also includes a fair launch and staking. Yam’s goal is to keep the price stable at $1 per token.
One unique thing about Yam is that it is community-owned and distributed through liquidity mining. This means that the tokens were not pre-mined or allocated to founders and everyone had equal opportunity to obtain tokens through a yield farming program.
Despite being a relatively new and unexplored project, Yam quickly gained popularity. Within two days, $600,000,000 worth of it was locked in stake pools.
Unfortunately, due to a bug in the rebase, more coins were created
