Rebase Tokens.

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Hello friends, good to have you back here. Welcome to my blog. Trust you're keeping well. I hope you're getting value from my post? Please feel free to always share your thoughts in the comment section.

Today we would be looking at another Interesting topic I've titled "Rebase Token". It might sound new to many of us here but as usual I will do my best to simplify this lesson, making it very comprehensive even to a complete novice. So guys let's get into it right away.

Introduction

There are quite a number of token in the crypto world, with each having their different functionality and mode of operation. We have stable coins, governance token, utility tokens, security/privacy token and the list goes on.

Just today I stumbled upon a class of token called the Rebase token. My curiosity made me looked deeper into what this token is all about, how it operates and of course I got my facts which am gonna be sharing with y'all.

What is Rebase Token

A Rebase token is a unique type of token that is specially designed to function in such a way that it circulating token supply adjust automatically as the price of the token fluctuates in the market. By adjustment I mean a corresponding increase or decreasing in the token supply as price faces fluctuation.

They seem to have a slight semblance with stable coin because both have a target price they want to be pegged at but they are totally different from stable coin. Rebase token are often referred to as elastic coin, no matter how price fluctuates they still maintain their values in the users wallets because of the mechanism that automatically adjust token in the face of price fluctuation.

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The adjustment mechanism behind Rebase token is such that Rebase token automatically burn or mint new tokens depending on the movement of price. If there are too many of the coin in circulation which could make the price reduce in value, some of it would be automatically be burnt and if the reverse is the case, new token would be minted to level up with price.

This then establishes the fact that Rebase token are built on smart contract meaning they are coded to self execute actions when the required condition for such action to be executed have been met just as explained above i.e when the condition for adjustment that require a token burn is met, the smart contract executes it immediately and if it's the reverse, the same is done.

Populate Example of Rebase token includes Ampleforth (AMPL), YAM, RMPL BASED, Staked Ether (stETH), OlympusDAO (OHM) etc.

Practical Example of how Rebase token works

Let's take for instance now that James has 1AMPL, a rebase token, and then due to price fluctuation it became $2 instead of $1 which is the target price. The mode of adjustment would be that James 1 AMPL (which is suppose to be $1 in value) will now be have to decrease to become 0.5 AMPL just so it can level up with his new wallet value balance of $2

Pros of Rebase Tokens

The advantages of Rebase token includes price stability which of course give it an edge over other kinds of cryptocurrency that are tossed about by price fluctuation and volatility.

Another advantages is that there is high level growth potential for rebase token because of the bunch of investors out there who are looking to maximize and leverage on it price stability. Although it a new model that is still been tried but then it looks promising.

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Lastly it Decentralized nature is something to really make one look in it direction. It would be difficult for it to be manipulated by some central figures.

Cons of Rebase Tokens

There are quite a number of downside to Rebase Tokens which includes risks of failure. It's a class of coin that is still being tried, you can call consider it to be in it infancy stage and of course it could fail due to factors ranging from smart contract vulnerability, technical issues or lack of massive adoption.

Volatility is another threat to this class of token. Record has it that volatility has once dealt with a token of this class called OlympusDAO. They narrowly escaped the effect of the volatility even after slashing the reward rate of their investors.

Lastly, taking time to understanding the technology behind how the token works and operate might just be some sort of turn off for most investors as they wouldn't want to venture into what they do not understand. This would also slow down the rate of it adoption, making it suffer some set back.

Bottom Line

I believe by now we know what Rebase Tokens are and it contribution to the crypto space. If you're looking for stability beyond the regular stable coin you've always known, Rebase coin would be your best bet.

I trust you've gotten so much from this piece. As my usual custom is, I would always encourage that you DYOR to be sure of every financial step you would want to take as I won't be liable for any form of loss encountered by you.

Feel free to share with me your thoughts in the comment section. Thanks for your time once again. Gracias!

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^{Disclaimer: This post is made as an education and not investment advice. Digital asset prices are subject to change. All forms of crypto investment have a high risk. I am not a financial advisor, before jumping to any conclusions in this matter please do your own research and consult a financial advisor.}

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Regards
@lhorgic♥️

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