Rebase Definition

Conversely, with prices going down, the supply would decrease, which means that you will have fewer tokens that are individually worth more than before. Rebasing is the process of changing the circulating supply to accommodate volatility, usually after 24 hours depending upon the Time-Weighted-Average-Price . Our Website is a financial data and news portal, discussion forum, and content aggregator, so cannot substitute for professional advice and independent verification.

This means that it’s an asset where its supply relies on the changes in the token’s price. With the use of smart contracts, the supply is adjusted by doing a process called ‘rebase’. The development of technology has pushed people to create new ways to improve the financial industry.

Currently, the new Yam 3.0 protocol has one liquidity pool with a YAM/yUSD pair. YAM was one of the first projects to offer a high-yield farming model. The supply of these tokens was fixed, and the price was not tied to anything. The first algorithmic-adjustable assets were proposed in 2017 by the Basis project, which sought to create tokens free from volatility.

What Is Rebase?

Following a elastic supply token, the quantity of tokens in user wallets modifies accordingly. To elaborate, if Bob has 1 AMPL, which doubles in value to become $2, the supply will inflate during the rebase period. This means that Bob’s 1 AMPL will decrease to 0.5 AMPL, yet the value will still be $1 since 1 AMPLE would now be worth $2. A token designed so that the circulating supply adjusts automatically according to price fluctuations. The move makes ApeSwap much more efficient in terms of earning trading fees, allowing liquidity providers to have more control and users to have better swapping rates.

This strives to reward its users by providing them with a crypto asset called YAM. This token mirrors the price of the US dollar and also uses the rebasing process to accommodate its volatility. Lack of an AMM has been one of the missing pieces to the puzzle in the ability to successfully launch and provide liquidity for an elastic supply token. Perhaps the biggest recent example of the lack of infrastructure for elastic tokens was Olympus DAO’s decision to wrap sOHM with gOHM, thereby eliminating the elastic token. Equally, ElasticDAO faced significant headwinds due to this missing building block. We are excited and honored to have launched with the full support of Ampleforth and their team.

DeFi on Bitcoin

In designing the launch and release schedule, we’ve taken heavy influence from their team. At any rate, it’s essential to be alert to the risks that investing in tokens with no constant supply has. Rebases expend holders’ capital when the rate is growing but also causes more losses on the way down. Although the protocol boosted $133 M in funding in 2018, it was closed by the US regulatory agency as the company’s tokens were determined as securities. The following command lists all service account tokens that are defined in theservice_tokens file.

However, the two are different from each other in more ways than one. Another reason why investing in elastic supply tokens is risky is that they are an experimental asset that increases the chances for projects to have bugs in their smart contract code. Another reason why investing in elastic supply tokens may be risky is that they are an experimental asset that increases the chances for projects to have bugs in their smart contract code. Ampleforth is the original rebase token that popularised the concept before other projects started adopting it. The rebase token aims to act as reserve collateral for decentralized finance applications.

Conversely, should the price be below 0.95 BTC, then the circulating supply of DIGG reduces. If the price is between the 0.95 to 1.05 BTC range, rebases don’t happen, and supply remains unchanged. In other words, rebase tokens have an elastic supply with the circulating supply adjusted according to supply and demand, thereby aiming not to affect the value of tokens held by the user. The primary concept behind the idea highlights that the value of elastic supply tokens stays stable. They are usually considered identical to stablecoins because of their desire for keeping the value stable. But, there are pretty primary differences between the two of them.

Yam Yield Farming

In August 2020, a bug was discovered that made YAM and its $750,000 yCRV fund unmanageable and immutable; hence there is no way to place YAM in liquidity pools on decentralized exchanges safely. The YAM token will exist as long as Ethereum maintains a corresponding contract. It has no hard cap to its supply, ownership rights to the underlying DAO vault, or guaranteed value of any kind. The ElasticSwap team is a big fan of the fair launch approach taken by Alchemix with their $ALCX token.

The lesson learned here is that Algorithmic stablecoins are much more volatile than their collateralized counterparts, and traders/holders must take that into account. ESD is an algorithmic supply-elastic stablecoin whose freshly minted tokens are used as an incentive to maintain the peg. OUSD developers are working to implement the process of lending stablecoins by integrating into Compound, Aave, and dYdX protocols. It’s also worth noting that OUSD is one of the payment methods on the Dshop platform.

The idea is that your holdings proportional to the total supply haven’t changed with the rebase. If you had 1% of the supply before the rebase, you should still have 1% after it, even if the number of coins in your wallet has changed. In essence, you retain your share of the network no matter what the price is. Ampleforth uses Chainlink price oracles to reach the target price.

Tokens that come with elastic prices may additionally pose themselves as an option to stablecoins in the near future. Elastic Supply Tokens work by using smart contracts to automatically increase or decrease the supply of tokens based on predefined rules. For example, if the price of an Elastic Supply Token goes up, the smart contract may automatically increase the supply of tokens to bring the price back down. Conversely, if the price goes down, the smart contract may decrease the supply of tokens to push the price back up. To understand the concept of elastic tokens, let’s discuss this example. Let’s say you have 100 ETH in your wallet at a given time when each token is worth $5 (a total of $500 worth of ETH).

For instance, let’s say a token “B” rebases every 24 hours with a target price of $1. This means if the price rises above $1, then extra B tokens are released, thereby expanding the supply. The expansion of supply during rebase is meant to catalyze fundamental market forces that will drive the price of AMLP down to its target price. Most importantly, DIGG utilizes a non-dilutive and continuous rebase mechanism, ensuring transparency and fairness for all involved! If you own 1% of the DIGG supply, you will always own 1% of the DIGG supply regardless of supply changes — unless of course, you exit or change your position.

• Another reason why investing in elastic supply tokens may be risky is that they are an experimental asset that increases the chances for projects to have bugs in their smart contract code.
• However, afterward, the idea evolved, and new kinds of elastic tokens appeared.
• Elastic supply tokens comprise a rising sector of DeFi that’s seeing rapid iteration lately.
• Only invest in elastic supply tokens if you can fully grasp the mechanisms behind them.

The unique mechanism behind them allows for a lot of experimentation. Rebase tokens are one of the most rapidly advancing spheres of DeFi. Currently, it is possible to trade the token on SushiSwap, CoinMarketCap, 1inch Exchange, and other markets.

Below are the descriptions of some common rebase tokens currently. However, afterward, the idea evolved, and new kinds of elastic tokens appeared. While the thought of making insane gains is quite stimulating and interesting, that should not be the sole intention when purchasing rebase token. Investors are advised to fully understand what they are investing in. It’s super important to know what the rebase target is for a coin with rebase mechanics before investing/buying; setting your expectations right will ensure you do not lose your funds immediately.

The supply of these tokens is algorithmically adjusted through a process called rebase, thus calling them rebase tokens alternatively. These supply adjustments automatically occur to expand or contract the supply of tokens when the value of the token falls above or below the given target price. An elastic token, also known as rebase coins, is a cryptocurrency that constantly changes its supply as a means to maintain its price.

• Elastic Supply Tokens work by using smart contracts to automatically increase or decrease the supply of tokens based on predefined rules.
• If the TWAP price is outside of the specified thresholds, the Rebase mechanism does not try to bring the price to peg in only one occurrence.
• Unlike stablecoins, elastic supply tokens don’t necessarily try to eliminate the volatility.
• Here if we talk about an elastic supply token, it is also known as a rebase token, which does not have any fixed token supply of any kind.

The https://coinbreakingnews.info/ market is very volatile, and rebase tokens have proved that point further. They are incredibly speculative assets and ideally, only experienced and smart investors who practice proficient risk management should participate. Similar to futures markets, the upside exists when the market is in an uptrend, and you tend to gain excellent traction.

Parallel to this, if the price is higher — there will also be a higher quantity supplied — driving the price back down. Bitcoin is an interesting case, because over the time the supply of newly minted coins decreases — with emission rates “halving” every 4 years. Elastic supply tokens have gotten a lot of press recently, bringing with them greed and criminal actors out to defraud unwary members of the crypto community. Users are urged to watch for all of this, as glitches and amusing acts are never in limited supply in the crypto world. Overall, these tokens provide a one-of-a-kind system that aspires to exchange like money or a commodity. In principle, because the rebase mechanism transmits to users proportionally, supply and demand are the determinants of value.

For example, if a user owned 0.1% of the supply, they will still own 0.1% of the supply after the rebase. As such, rebase tokens can be thought of as shares of a Market Cap, rather than shares of a supply. For most Rebase tokens, the expansion/contraction amount is not determined by the spot price at the moment of Rebase, but rather by the Time-Weighted-Average-Price over a 24 hour period. This approach prevents users from front-running the rebases, and serves to smooth out price fluctuations . Most rebase tokens also utilize a system similar to what is depicted in the above chart. As long as the TWAP price remains within the white bounds, no supply expansion or contraction occurs.