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Glossary

This is a glossary of terms related to crypto, blockchain and Rain.

Rebase

What Is Rebase?

A rebase, also known as price-elastic, is a token built in such a way that the circulating token supply automatically adjusts (increases or reduces) in response to a token's price variations. A rebase mechanism is what we term this expansion and contraction. 

Rebase tokens are similar to stablecoins because both have price targets. Unlike stablecoins, rebase tokens have an elastic supply, which means that the circulating supply responds to supply and demand without affecting the value of the tokens in users' wallets.

How Rebase Works

A rebase protocol is used on a regular basis. Ampleforth's AMPL, for instance, has a rebase planned every 24 hours with a target price of $1. If somehow the price of an AMPL token exceeds $1, the circulating supply rises during rebase, lowering the value of every AMPL token. 

If the value of AMPL falls below $1, the existing supply contracts during the rebase, boosting the value of every token. The amount of tokens in every wallet will either increase or decrease in proportion. 

Despite this, the total value of every wallet remains constant due to the rebasing technique. It can be illustrated further with an example: if Robert holds 1 AMPL, which doubles in price to become $2, the supply will increase over the rebase time. This means that Robert's 1 AMPL will be reduced to 0.5 AMPL, but the value will remain $1 because 1 AMPLE has become worth $2.

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