Rebase tokens, an interesting concept, have mostly gone unnoticed and from what I have noticed, education on rebase tokens comes when a holder notices the amount of tokens in their wallet getting smaller each time they open their wallet. That’s where panic sets in and research starts, as was in my case.
This sort of token is created using smart contracts and focuses on altering the circulating quantity of the token whenever the price changes to lessen the coins’ volatility.
Their purpose is similar to stablecoins, but they operate in a completely different manner. Rebase tokens, unlike stablecoins, have a rebase, which means that the circulating quantity responds to supply and demand without changing the value of the tokens in users’ wallets.
What is a rebase token, exactly?
When the circulating supply extends or reduces due to token price changes, a Rebase Token is used. The technique that causes this increase or decrease in supply is known as rebasing. When a rebase takes place, the token’s supply is increased or decreased based on the current price of each token. In other words, if the price increases the mount of cryptocurrency tokens in circulation decrease, even the amount being held in wallets.
The price of Gshib has been increasing, therefor the supply is decreasing causing the Gshib in my wallet to also decrease. The result is, I now have 1.7 Million
What is the distinction between regular tokens, Stablecoins, and Rebase Tokens?
Let’s look at three different tokens: ordinary tokens, stablecoins, and rebase (rebase) tokens to see how they differ.
Regular tokens, like those used by most projects, are pretty volatile. Consider Bitcoin coins, which rise in value by thousands of dollars before plummeting by thousands more because they are not linked to any real-world asset. Their value swings depend on demand, which is influenced by news, forecasts, and other factors.
Stablecoins, such as Tether (USDT), USD Coin (USDC), Gemini Dollar (GUSD), and others, are an exception. As a result, they have a constant price because a fixed amount of fiat money backs each coin. Because each Tether (USDT) token is supported by $1, the cost of Tether is always $1.
In the supply of coins rather than the price of each coin. Their supply shifts in response to rising or falling prices. Assume you put $100 into a hypothetical rebase token with a value of $1.
This means that the value of your possessions has increased to $100. If the price of the coin changes, so does the supply, and you might have 200 tokens for $0.5 the next day. Alternatively, you might only have 50 tokens worth $2 when you wake up.
As you can see, you will still have $100 worth of tokens in your hands; but, the number of tokens you hold will fluctuate according to their value.
This occurs during a rebase, which is essentially a process that assures that the value of your investment remains unchanged by adjusting the supply.
How Does the Rebase Token Work?
In this arrangement, rebases happen once every 24 hours to keep the price peg in place. Ampleforth is a self-described digital asset system based on supply and demand mechanisms for smart commodity money.
When the price is above the peg, the Ampleforth protocol introduces inflation, and when the price is below the peg, it presents deflation. Supply modifications are made to ensure that the equilibrium price is maintained.
After implementing its Geyser liquidity mining scheme, a liquidity incentive that many Defi-based protocols utilize to bootstrap liquidity, AMPL witnessed significant growth.
Future of rebase tokens
Rebase tokens are a relatively new notion, but they’re a fascinating one.
We will undoubtedly see many more projects employing the rebase technique, and they may also trend quickly following their launch due to the marketing mentioned above method. Still, the question remains if users will be able to earn more than by trusting ordinary currencies.
What are your thoughts on Rebase Tokens? Would you invest in a Rebase Token? Comment below, lets start a conversation!
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