Simplified : Rebasing
Section 1 : Rebase function
Rebase is an increase or decrease in the total supply of a given token across all holding pools and all wallets. This is done in order to adjust the token price, without affecting the value of anyone’s share of coins.
For example, let’s say you have 100 tokens, worth $5. If there was a rebase that decreased supply by 5%, you would then have 95 tokens, but they would still be worth $5. This is because rebasing only affects supply — not your percent share of the market cap. Thus, to find the value of a rebasing token : it’s best to look at market cap.
Section 2 : Why Rebase?
The purpose of the rebase function, as stated before, is to control the price of a token. One reason this can be useful is it keep the price of the coin at a specific level — thus reducing the effect of volatility on the coins price. This is useful for stable-coins, which perhaps would be used in pricing goods of services.
Imagine pricing something in Ethereum — you’d have to be constantly adjusting the price. Whereas, if you price something in a rebasing stable-coin : you could confidently leave the price the same, knowing you’ll be receiving the same value every time (assuming the price is successfully controlled.)
Another use-case is to simply add another signal into the equation that determines the price. Given a set parameter, or parameters — the token could be made in such a way to rebase off of anything. For example, Velotoken rebases based on the number of transactions in a set period of time, thus measuring the volume of trading.
Section 3 : Why not peg the price?
Whether it’s a token that rebases, or a token that is pegged to the value of a FIAT currency — there will be a form of rebasing involved. If it’s not on the crypto side, then it will be done by the central bank that manages the FIAT currency. Central banks are constantly altering the circulating supply of currency (monetary policy) in order to stabilize the price.
Rebasing, for stable-coins, offers the potential to become completely independent from FIAT currency, while still (if desired) avoiding a collateral-based approach. In addition, block-chain allows for perfect information about your currency — where data collection in the FIAT world is much more imperfect and messy.
Use-cases such as Velotoken, use Rebase to bring a new price-signal to the DeFi toolkit. The “velocity” of a currency is something used by central banks to decide on monetary policy, and wasn’t used in crypto at all until $VLO. This measurement allows for a potentially more accurate pricing of a token.
Section 4 : Our Favorites Compared
This token is an example of a rebase stable-coin. The ultimate objective is to replace the major centralized stable-coins that are currently used. The rebasing of DEBASE gradually moves the price to be within 5% of DAI — which itself is kept at the price of the US dollar via depositing Ethereum as collateral.
The rebase cycle is determined by the creators or governors of the given token, but in DEBASE’s case : there is a rebase every 24 hours at 11.00 UTC.
The thing that separates DEBASE from other stable-coins is it’s full decentralization, and attempt to make a stable-coin that isn’t backed by anything except algorithms. It employs a novel technique to achieve this, called stabilizer pools, for more info on DEBASE click here.
$VLO is an fully-decentralized experimental rebase token (already with working governance), with a brand new mechanic. Instead of rebasing based on the price : it rebases based on the “velocity” of the token. Essentially, what this means, is that it increases or reduces the supply of the token, based on the number of transactions in a given period of time.
Thus, if there are a large number of transactions, the supply of the token will decrease. If, on the other hand, there are a lower number of transactions — then the supply of the token will increase.
This isn’t meant to be a stable-coin, but rather to incorporate the velocity of a token into the price. This is something that central banks attempt to measure when they try to stabilize their currency — but in crypto you can get a perfect measurement of it. Velotoken is the first step into a larger ecosystem, for more info on it : click here.
Written by @crypto_mission (TG)
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