What Is Rebase?
Also known as: Rebase Token, Elastic Supply, Supply Adjustment
In short
Rebase is the process in which a token's total supply is automatically increased or decreased periodically according to predetermined rules, with the change reflected proportionally in all holders' wallet balances.
A smart contract executes the rebase mechanism. Instead of storing balances directly, the contract keeps each user's share of the total supply; when the supply changes, everyone's displayed balance is updated at the same rate. This way, the user's percentage of the total supply does not change, only the number of tokens they hold does. This update happens without the user needing to do anything.
One of the best-known examples is Ampleforth (AMPL). When AMPL's price rises above the target value, the supply is increased, and when it falls below, it is decreased; the aim is to bring the value closer to the target by making the supply elastic instead of the price. Rebase is also used for a different purpose: Lido's liquid staking token stETH regularly increases holders' balances to reflect staking rewards.
Rebase tokens can be confusing: if the balance rises while the token price falls, the total value may not have increased. Tokens whose balances change on their own are incompatible with some DeFi protocols and exchanges; for this reason, a wrapped version with a fixed balance (wstETH) was developed for stETH. Because the value of some projects based on algorithmic supply adjustment has collapsed, the mechanism alone is not a guarantee of stability.
Last updated: · This content is for information purposes only and is not investment advice.