Elastic tokens, or rebase coins, are crypto-assets whose supply is adjusted algorithmically so that their price is under control. Rebase tokens are typically pegged to other assets, like stable coins. However, they do not utilise reserves; instead, they burn tokens in circulation or mint new ones to maintain the peg.
The token price is adjusted to avoid affecting anyone’s share of the coins. An algorithm helps to adjust the supply by increasing or decreasing the supply. Rebasing tokens can provide great advertising for projects because the chart never falls due to a continuously rising price floor.
What is its market scenario?
The recent 4000% increase in many rebase tokens, combined with the huge publicity generated by the launch of the Londefy project, indicates that this project may quickly rise to set new rebase milestones.
With Londefy, its unique smart contract re-distributes 16% tax from each transaction in the following circumstances: 5% is allocated to Londex (LDX) investors, and 5% is allocated to marketing purposes. Finally, 2% goes for the continued support of the project through rebasing and buybacks. The new token’s market capitalization currently sits at $1.1 million, with over 2000 holders.
How does it Work?
Rebases are routine. Ampleforth ( AMPL), a crypto asset, for instance, has a rebase schedule every 24 hours at a $1 target price. As the price of AMPL increases, its circulating supply expands, thereby reducing the value of each token. However, the value of each token will increase if the price of AMPL falls below $1 during rebasing. Wallets will gain or lose tokens accordingly. Despite this, the rebasing system ensures that the overall value of each wallet remains constant. For example, if Bob holds 1 AMPL, which doubles in value to $2 during the rebase time, the supply will increase. This means Bob’s 1 AMPL will be reduced to 0.5 AMPL, but the value will remain the same at $1 because 1 AMPL is now worth $2.
Limitations of Rebase Tokens
Rebase tokens are still in their early stages of development, and there could be certain hazards. The number of tokens you own will vary following a rebase token. For example, if the price of the rebase token rises in tandem with the number of tokens you own, you’re gaining double. However, the same may be said of the disadvantages. If the price starts to fall, the protocol loses money. This leads to reduced rebase payouts.
Current Top 3 Rebase Token –
Ampleforth (AMPL) is a crypto asset that has recently taken the crypto and DeFi world by storm. Its elastic supply function, which rebases every 24 hours, adjusts the maximum supply to keep the token price peg at $1. Following the success of Ampleforth, a slew of other tokens have emerged that are experimenting with rebase functionalities such as supply increase, supply decrease, rebate against the price of another token, and so on. Ampleforth is the original token that started it all, popularising rebase to the point where other tokens are copying and inventing on top of it.
Ampleforth’s smart contract essentially modifies the code of the balance of method. To alter the total ownership of the token, they only need to perform a contract call to rebase it. To invoke the rebase method in this situation, all you need is an epoch, the date-time for logging, and supplyDelta, which is to add or reduce the token’s supply.
The AntiAmple token rebases as well; however, it only permits the supply to be burnt. The rebase component of AntiAmple’s code is almost identical to Ampleforth’s rebase. OnlyOwner is a modification that allows you to access this rebase function.
Ampleforth’s RMPL is a random rebase token version. The contract owner will be locked after the on-chain random rebasing method has been finalised, ensuring that no party has power and that the implementation is self-governed.
Rebase tokens are similar to stablecoins and they are pegged to another asset. However, as opposed to using the reserves to maintain the peg, rebase tokens automatically burn tokens that are in circulation.