Rebase Tokens: What Are They & How Do They Work?

If
you’re
interested
in
cryptocurrency,
you’ve
probably
noticed
that
the
price
of
many
digital
assets
can
be
highly
volatile.
This
can
make
it
challenging
to
use
cryptocurrency
as
a
means
of
exchange
or
as
a
store
of
value.
Rebase
tokens,
also
known
as
elastic
tokens,
seek
to
offer
a
solution
to
this
problem. 

In
this
article,
we’ll
explore
what
rebase
tokens
are,
how
they
work,
and
whether
or
not
they
might
be
a
good
investment
for
you. 

What
Are
Rebase/Elastic
Tokens?

Rebase
tokens
are
a
type
of
cryptocurrency
that
adjusts
their
supply
to
maintain
price
stability.
This
is
in
contrast
to
traditional
cryptocurrencies,
which
have
a
fixed
supply
determined
at
the
time
of
their
creation.

Rebase
tokens
achieve
price
stability
through
a
process
known
as
a
“rebase,”
which
is
triggered
at
regular
intervals
(e.g.,
every
24
hours).
During
a
rebase,
the
supply
of
the
token
is
adjusted
based
on
a
predetermined
formula. 

For
example,
if
the
demand
for
a
rebase
token
has
increased
by
10%
since
the
last
rebase,
the
supply
of
the
token
will
automatically
increase
by
10%.
If
the
demand
for
the
token
decreases,
the
supply
will
also
decrease.
This
is
meant
to
keep
the
price
of
the
token
stable
even
in
the
face
of
fluctuating
demand.

How
Do
Rebase
Tokens
Work?

So,
what
is
a
rebase
cryptocurrency,
and
how
exactly
do
rebase
tokens
work
in
practice? 

Let’s
take
a
closer
look.

First,
it’s
essential
to
understand
that
rebase
tokens
are
built
on
smart
contracts.
A
smart
contract
is
a
self-executing
contract
with
the
terms
of
the
agreement
between
buyer
and
seller
being
directly
written
into
its
lines
of
code.
Smart
contracts
further
allow
for
the
automation
of
specific
processes,
such
as
the
adjustment
of
a
token’s
supply
in
response
to
changes
in
demand.

When
a
rebase
token
is
created,
the
smart
contract
is
programmed
with
a
predetermined
formula
for
adjusting
the
supply.
This
formula
is
typically
based
on
the
token’s
target
price
and
the
current
market
price. 

For
example,
if
the
market
price
of
a
rebase
token
is
below
the
target
price,
the
supply
of
the
token
will
automatically
decrease
to
bring
the
price
back
up
to
the
initial
target
price.
Conversely,
if
the
market
price
is
above
the
target
price,
the
supply
will
increase.

The
process
of
adjusting
the
supply
is
known
as
a
“rebase.”
Rebases
are
typically
triggered
at
regular
intervals,
such
as
every
24
hours.
When
a
rebase
occurs,
the
smart
contract
automatically
executes
the
predetermined
formula,
adjusting
the
token’s
supply
as
needed.

Examples
of
Rebase
Tokens

There
are
several
examples
of
rebase
tokens
currently
in
circulation.
Let’s
take
a
look!

Ampleforth 

Ampleforth
(AMPL)
is
a
cryptocurrency
that
was
one
of
the
first
to
use
an
elastic
supply,
which
means
that
the
supply
of
tokens
is
automatically
adjusted
to
maintain
a
stable
price.
In
the
case
of
Ampleforth,
the
target
price
is
$1
per
token.
To
achieve
this,
the
supply
is
adjusted
through
a
process
called
a
“rebase,”
which
occurs
every
24
hours.

While
Ampleforth
aims
to
be
a
stablecoin,
it
can
still
be
quite
volatile.
This
is
because
the
price
of
individual
tokens
is
not
the
only
factor
to
consider
when
evaluating
the
value
of
Ampleforth
(or
any
other
rebase
crypto).
Instead,
it
is
essential
to
also
consider
the
changes
in
supply
that
occur
through
rebasing.

One
way
to
gauge
the
growth
and
traction
of
Ampleforth
is
to
look
at
its
market
capitalization,
rather
than
the
price
of
individual
tokens.
Market
capitalization
is
a
measure
of
the
total
value
of
the
network
and
can
provide
a
more
accurate
picture
of
its
overall
performance.

Ampleforth
gained
significant
traction
through
a

liquidity
mining
campaign
called
Geyser,
which
distributes
tokens
to
participants
over
a
period
of
ten
years.
This
demonstrates
how
liquidity
incentives
can
drive
adoption
and
growth
for
a

decentralized
finance
(DeFi)
project.

RMPL

RMPL
is
a
cryptocurrency
forked
from
Ampleforth
and
uses
a
similar
elastic
supply
mechanism.
However,
RMPL
incorporates
a
randomized
rebasing
process
and
has
a
target
price
of
$1.
This
means
that
the
supply
of
RMPL
tokens
is
adjusted
randomly,
rather
than
in
response
to
specific
price
movements,
to
maintain
stability.

The
rebasing
period
for
RMPL
occurs
over
a
maximum
of
48
hours
and
is
triggered
when
the
price
rises
above
$1.05
or
falls
below
$0.95. 

By
using
randomized
rebasing,
RMPL
aims
to
prevent
price-fixing
and
maintain
a
stable
price
for
its
tokens.
It
is
designed
to
be
a
stable
store
of
value
for
decentralized
applications
(dApps)
and
a
medium
of
exchange
for
peer-to-peer
transactions.

YAM
Finance

Yam
Finance
is
a
cryptocurrency
that
uses
an
elastic
supply
mechanism
similar
to
Ampleforth’s.
It
also
incorporates
elements
of
staking
and
a
fair
launch.
The
goal
of
Yam
is
to
maintain
a
stable
price
of
$1
per
token.

One
unique
aspect
of
Yam
is
that
it
is
community-owned
and
was
distributed
through

liquidity
mining.
This
means
there
was
no
pre-mine
or
founder
allocation,
and
all
participants
had
an
equal
opportunity
to
acquire
tokens
through
a
yield
farming
scheme.

Despite
being
a
relatively
new
and
unknown
project,
Yam
quickly
gained
traction
and
achieved
$600
million
in
value
locked
in
its
staking
pools
within
two
days
of
its
launch. 

Unfortunately,
a
bug
in
the
rebasing
mechanism
caused
more
supply
to
be
minted
than
intended,
leading
to
the
need
for
a
community-funded
audit
and
a
relaunch
of
the
project
on
a
new
token
contract.
The
future
of
Yam
is
now
in
the
hands
of
its
holders.

Merits
and
Demerits
of
Rebase
Tokens

Just
like
any
innovation,

rebase
tokens
have
some
merits
and
demerits,
some
of
which
we
highlight
below.

Merits
of
Rebase
Tokens 

So,
what
are
the
potential
benefits
of
using
rebase
tokens?
Here
are
a
few
key
points
to
consider.

Price
stability:
The
primary
advantage
of
rebase
tokens
is
their
ability
to
maintain
price
stability.
By
automatically
adjusting
the
supply
in
response
to
changes
in
demand,
rebase
tokens
can
keep
their
price
relatively
stable,
even
in
volatile
market
conditions.
This
can
be
appealing
to
those
who
want
to
use
cryptocurrency
as
a
means
of
exchange
or
as
a
store
of
value.

Decentralization:
Rebase
tokens
are
decentralized,
meaning
they
are
not
controlled
by
any
single
entity.
This
makes
them
less
vulnerable
to
manipulation
and
more
resistant
to
censorship.

Potential
for
increased
adoption:
By
offering
a
stable
price,
rebase
tokens
could
potentially
be
more
appealing
to
merchants
and
consumers
who
are
hesitant
to
use
traditional
cryptocurrencies
due
to
their
volatility.
This
could
lead
to
increased
adoption
and
use
of
rebase
tokens,
potentially
driving
up
demand
and
value.

Demerits
of
Rebase
Tokens

While
rebase
tokens
have
some
potential
benefits,
they
also
have
some
drawbacks
that
should
be
considered.

Complexity:
Rebase
tokens
are
complex,
both
in
terms
of
their
underlying
technology
and
how
they
function.
This
can
make
them
difficult
for
some
users
to
understand
and
use.

Volatility:
Despite
their
aim
to
maintain
price
stability,
rebase
tokens
are
not
immune
to
volatility.
The
price
of
rebase
tokens
can
still
fluctuate
significantly,
and
there
is
no
guarantee
that
they
will
be
able
to
maintain
a
stable
price
over
the
long
term.

Risk
of
failure:
As
with
any
cryptocurrency,
there
is
always
a
risk
that
a
rebase
token
could
fail.
This
could
be
due
to
various
factors,
such
as
technical
issues,
security
vulnerabilities,
or
a
lack
of
adoption.

Should
Rebase
Tokens
Be
In
Your
Crypto
Portfolio? 

As
with
any
investment,
it’s
essential
to
carefully
consider
the
potential
risks
and
rewards
before
investing
in
any
cryptocurrency.
While
rebase
tokens
have
some
unique
characteristics
that
could
make
them
a
compelling
investment
for
some,
it’s
also
important
to
be
aware
of
the
potential
risks.

One
potential
risk
to
consider
is
that
rebase
tokens
are
a
relatively
new
and
untested
concept
in
the
world
of
cryptocurrency.
This
means
that
there
is
a
higher
degree
of
uncertainty
surrounding
their
long-term
prospects,
and
it’s
possible
that
they
could
fail
or
not
live
up
to
their
potential.

That
being
said,
rebase
tokens
could
potentially
provide
a
valuable
tool
for
traders
and
investors
looking
to
hedge
against
the
volatility
of
traditional
cryptocurrencies.

In
the
end,
whether
or
not
rebase
tokens
should
be
in
your
portfolio
or
not
will
depend
on
your
investment
goals,
risk
tolerance,
and
overall
investment
strategy.
As
with
any
investment,
it’s
essential
to
do
your
research
and
carefully
consider
all
the
potential
risks
and
rewards
before
making
a
decision.