Rebase
What is Rebase in crypto?
Rebase is a mechanism in cryptocurrency tokenomics that automatically adjusts the total supply of a token to stabilize its price around a target value. Instead of changing the token’s price directly, the number of tokens in each wallet is increased or decreased, while the total value of holdings remains roughly the same.
Rebase is often used by algorithmic stablecoins or experimental DeFi tokens, aiming to peg to an asset (e.g., USD) or maintain controlled volatility.
How does Rebase work?
Positive rebase – If the token price rises above the target, the protocol increases supply, adding more tokens to each wallet.
Negative rebase – If the token price falls below the target, the protocol reduces supply, removing tokens from each wallet.
Proportional adjustment – The percentage of ownership remains unchanged for holders.
Despite these supply changes, holders maintain the same relative share of the total supply.
Why is Rebase used in crypto?
Stabilizing token price – To keep a peg to USD or other targets.
Creating synthetic assets – Mimic other assets' prices without direct backing.
Experimental monetary policy – Test dynamic supply models in decentralized finance.
Incentivizing or disincentivizing holding – Encourage behavior depending on market conditions.
Examples of Rebase tokens
Token | Purpose | Mechanism |
|---|---|---|
Ampleforth (AMPL) | Algorithmic stablecoin aiming for $1 peg | Daily rebase adjusting supply |
BASE Protocol (BASE) | Synthetic index token pegged to total crypto market cap | Supply adjusts to track index |
OlympusDAO (OHM, v1) | Algorithmic treasury-backed reserve currency | Rebase mechanism part of protocol |
Pros and Cons of Rebase tokens
Pros | Cons |
|---|---|
Automatically adjusts supply to target price | Highly volatile in practice |
Innovative approach to stablecoins | Complex to understand for new users |
No need for collateral in some cases | Price peg can fail if market loses confidence |
Equal proportional holdings maintained | Impact on token integrations (DEX, DeFi) |
Difference between Rebase and Regular Tokens
Feature | Rebase Token | Regular Token |
|---|---|---|
Supply | Dynamic, adjusts over time | Fixed or predetermined |
Price stabilization | Yes, via supply adjustments | No built-in stabilization |
Holder balance | Can increase or decrease automatically | Remains constant unless user trades |
Common use cases | Algorithmic stablecoins, experimental finance | Utility, governance, store of value |
Risks of Rebase tokens
Unpredictable returns – Token balance changes can confuse investors.
Market manipulation risk – Depend on market confidence, vulnerable to speculation.
Integration issues – Difficult for DEX pools and DeFi apps to handle changing supplies.
Failure of price peg – If market doesn't react as expected, peg mechanism may break.
Conclusion
Rebase is a unique mechanism that dynamically adjusts token supply to maintain price stability, offering innovative solutions in DeFi. While rebase tokens introduce new economic models, they come with risks and complexities that require careful understanding. For investors, understanding rebase logic is essential before participating in such projects.
