An automatic adjustment of a token’s circulating supply to stabilize its price.
A Rebase is an automatic adjustment of a token’s circulating supply designed to stabilize or influence its price. In a rebase mechanism, the number of tokens in each holder’s wallet increases or decreases proportionally, while the total value of their holdings ideally remains the same.
Rebasing does not dilute or concentrate ownership; it adjusts supply across all wallets simultaneously.
How Rebase Tokens Work
Smart contracts periodically adjust token supply
Supply changes are based on predetermined rules or targets
Token balances in user wallets automatically update
Prices typically move inversely to supply changes
For example, if a protocol targets a $1 price and the token trades above it, a positive rebase increases supply. If it trades below target, a negative rebase reduces supply.
Use Cases for Rebase Models
Maintaining soft price targets (algorithmic stablecoins)
Elastic supply tokens
Experimental monetary systems
Incentive-driven DeFi mechanisms
Risks and Challenges
Volatility despite supply adjustments
Market uncertainty during severe negative rebases
Difficulty maintaining long-term price stability
Susceptibility to speculative bubbles
Summary
A rebase is a supply adjustment mechanism that changes token balances proportionally to help maintain a target price or economic model.
