Rebase tokens are a relatively new and at the same time rapidly growing DeFi sector. These tokens can be automatically adjusted through rebasing and thus maintain a target price. This innovation opens the door to new unique DeFi projects and investment strategies, but at the same time remains quite risky.
Today Notum will guide you through the world of rebase tokens, tell you what elastic coin is, how such tokens work, and their pros and cons. In addition, we will look at the top 5 elastic tokens relevant in 2024 and where you can buy them.
What Are Elastic/Rebase Tokens?
A rebased or price-elastic token is a type of crypto asset whose total token supply is not fixed. This way, the project's token supply is automatically adjusted regularly, making it "elastic".
Interesting fact! These token supply adjustments are called “rebases”, hence the name of the tokens.
When the price of a rebase crypto falls above or below its target price, the supply automatically changes to increase or decrease the amount of tokens. This process of changing supply not only compensates for volatility but also strives towards the target price through a time-varying supply of tokens.
Important! The supply of rebasing tokens is usually adjusted every 24 hours depending on the Time Weighted Average Price (TWAP).
How Do Elastic Tokens Work?
Elastic supply tokens work in such a way that the circulating supply can either expand or decrease due to changes in the price of the token. A rebasing mechanism controls the supply based on the current price of each token.
Example! There is an elastic token X that aims to achieve a price of $5. If it exceeds $5, the current supply of X will increase, thereby decreasing each token’s value. Conversely, if token X drops in price and becomes cheaper than $5, the rebasing mechanism will reduce the total supply of tokens to return the price.
Thus, if you keep let’s say 10 elastic tokens in your wallet and the established price decreases, the rebase will occur and you will already have 9 tokens, but each of them will cost proportionately more.
Important! Although in a sense elastic enrollment tokens are parallel to stablecoins due to the desire to reach a target price, the main difference is that rebase tokens aim to achieve it due to a changing supply.
What Are the Benefits of Using Elastic Tokens?
- Price stability. The rebase adjusts the token’s supply to maintain the set price. Thus, rebase tokens get rid of the volatility and maintain a stable value of assets.
- Automation and decentralization. The rules regulating supply adjustments are encoded in the smart contract and operate autonomously. Thus, rebalancing occurs without central authorities, which makes the process more secure and transparent.
- Innovative offers. The uniqueness of elastic tokens allows them to be used in various financial products and strategies. Moreover, they let developers come up with new and unique DeFi products and solutions.
- Trading. Rebase tokens are made for trading and income. However, investing in price-elastic tokens can lead to both profits and losses, so it is important to remain cautious.
Top 5 Elastic Tokens
Ampleforth ($AMPL)
The Ampleforth project was created as a synthetic commodity without collateral to provide returns that are uncorrelated with the rest of the crypto economy. $AMPL is not only one of the first elastic tokens, but also one of the largest rebase tokens on the market. It’s supply adjusts every 24 hours.
«Ampleforth aims to be an uncollateralized synthetic commodity, where 1 AMPL targets a price of 1 USD» - Binance Academy.
Even though the token price is targeted at $1, the asset can be quite volatile. For example, the all-time high of the token was $4.04, and the all-time low was $0.294. As of July 2024, the value of the token is $1.14.
Source: Coinmarketcap
BASE Protocol ($BASE)
$BASE is a unique token with a price of 1:1 trillion tied to the market capitalization of all cryptocurrencies. This means $BASE is linked to $1 if the entire market capitalization of the cryptocurrency is $1 trillion. However, if the cryptocurrency market is worth say $3 trillion, the token will be worth $3.
Interesting fact! Due to its unique feature, traders can speculate on the entire crypto market with a single token.
Currently, the token price is $1.17. The maximum supply of the token is 480,680 BASE and they are all in circulation.
Origin Dollar ($OUSD)
Origin Dollar or $OUSD is a stablecoin that allows users to receive rewards for only holding tokens in their wallet. $OUSD is an Ethereum-based ERC-20 token that aims to maintain a 1:1 exchange rate with the US dollar.
Important! Origin Dollar has its own decentralized application “The Origin Dollar dApp” which makes it easier to purchase the token and provides more favorable rates for selling and buying stablecoin.
In July 2024, the value of $OUSD is $0.99. The total supply of the token is 7,410,269 OUSD and they are all in circulation. It is important to note that the token is also volatile, as its all-time high reached $1.84 and its all-time low was $0.08.
Olympus ($OHM)
The Olympus Protocol s a DeFi system that supports a treasury-backed token called $OHM. Olympus is subject to the Range Bound Stability (RBS) system, which means it programmatically encourages a price range for market participants.
What makes OHM unique is that it is not backed by any fiat currencies such as the dollar. $OHM is not a stablecoin, as it is backed by growing Olympus Treasury assets of over $200 million.
At the moment, the total supply of the token is 1.42 million OHM, and the cost in July 2024 is $12.41.
Frax ($FRAX)
$FRAX is another unique token that offers collateralized and algorithmic models at the same time. This token is relatively safe and strives to maintain a target price of $1.
What makes $FRAX unique is that users can control the protocol and request to refresh the collateral ratio. Due to its mechanism, the token is more capital-efficient and reliable than algorithmic and other stablecoins.
The total supply of the token is 1,044,853,133 FRAX, however, only 649 million are in circulation. The token price is currently $0.99. $FRAX. It’s also one of the less volatile tokens on our list as its all-time high is $2.19, while its all-time low only dropped to $0.78.
Bonus token: Overnight USDC+ (USDC+)
Overnight is a unique DeFi platform offering cutting-edge solutions to maximize user income. Overnight is based on stablecoins, which maintain a stable value relative to their underlying assets.
USDC+ is an ERC20 rebase token that runs on Ethereum and is one of the main stablecoins on the platform. USDC+ is completely collateralized and can be instantly converted into US dollars. The token also strives to be worth of $1.
Total supply of the token is 1,772,403 USDC+, and the price in July 2024 is $0.99. USDC+ is a fairly stable elastic token as its all-time high only got to $1.02, while all-time low dropped to $0.96.
What Are the Risks of Using Elastic/Rebase Tokens?
- High volatility and price fluctuation. Although elastic supply tokens can increase profits, they can lead to losses due to price fluctuations. If a rebase happens when the token price drops, the user will not only lose money but will own fewer and fewer tokens with each rebase.
- Complexity. Since the mechanics behind elastic tokens are quite difficult to understand, investing in such assets often leads to losses. This is why it is important to only buy elastic tokens if you fully understand how rebasing affects token supply and value.
- Protocol compatibility. Not all DeFi platforms can handle dynamic supply changes of rebase tokens. Thus, it may also lead to some loss of funds and technical problems.
Where Can I buy Elastic/Rebase Tokens?
You can purchase elastic supply tokens on various crypto exchanges and platforms. You can consider centralized exchanges namely Binance, Kraken, etc. You can also pay attention to decentralized options such as Uniswap or Balancer.