Rebase Summary
- Rebase adjusts the total supply of a cryptocurrency.
- It aims to stabilize the token’s price by altering supply rather than demand.
- Rebase can increase or decrease the number of tokens held by users.
- It’s often used in algorithmic stablecoins and elastic supply tokens.
- Rebase events are typically automated and occur at predefined intervals.
Rebase Definition
Rebase is a mechanism in cryptocurrency that adjusts the total supply of tokens in circulation to stabilize the price. It involves proportionally increasing or decreasing the number of tokens in each holder’s wallet based on a predetermined algorithm, without affecting the overall value of their holdings.
What Is Rebase?
Rebase is a process by which the total supply of a cryptocurrency is periodically adjusted.
This adjustment aims to stabilize the price of the token.
The rebase mechanism increases or decreases the number of tokens in circulation by altering each holder’s balance proportionally.
This is done without changing the overall value of their holdings.
Who Uses Rebase?
Rebase mechanisms are mainly utilized by projects that issue algorithmic stablecoins or elastic supply tokens.
These projects aim to maintain a stable value or follow a specific price target.
Developers, traders, and investors involved in these projects engage with rebase mechanisms.
Such users seek to benefit from the price stability and unique economic dynamics offered by rebasing.
When Is Rebase Implemented?
Rebase events are typically scheduled to occur at regular intervals.
These intervals can be daily, weekly, or according to another predefined schedule.
The timing is set by the project’s algorithm and is often transparent to the community.
The rebase mechanism is triggered automatically based on market data and predefined parameters.
Where Does Rebase Occur?
Rebase occurs within the blockchain network of the specific cryptocurrency implementing this mechanism.
It is executed on-chain, meaning all adjustments are recorded in the blockchain ledger.
This ensures transparency and immutability of the rebase events.
The process impacts all wallets holding the rebasing token, regardless of their location.
Why Is Rebase Important?
Rebase is important because it provides a unique way to stabilize the price of a cryptocurrency.
By adjusting supply instead of manipulating demand, it offers an innovative approach to market stability.
This can help maintain investor confidence and reduce volatility.
Moreover, it allows for the creation of new types of financial instruments and stable assets.
How Does Rebase Work?
Rebase works through an algorithm that calculates the necessary adjustment to the token supply.
When a rebase event is triggered, the algorithm increases or decreases the number of tokens in circulation.
This change is reflected proportionally in all wallets holding the token.
For example, if the supply needs to increase by 10%, each wallet’s balance will increase by 10%.
Conversely, if the supply needs to decrease, each wallet’s balance will be reduced accordingly.
This mechanism helps align the token’s price with its target value.
It ensures that the overall value held by users remains the same, even though the number of tokens they hold changes.
