What is a Rebase Token

Definition of Rebase Tokens

Rebase tokens, also known as elastic supply tokens, are a special type of cryptocurrency. These tokens share a common feature—the “Rebase Mechanism”—which means that the circulating supply of the token automatically adjusts dynamically based on fluctuations in the token’s price (or the price of the pegged asset). This mechanism is implemented through the token’s smart contract, maintaining a certain ratio between the user’s holdings and the total supply to stabilize the actual value of user holdings.

Operation Mechanism of Rebase Tokens

Different rebase tokens have various elastic supply mechanism designs, but overall, they follow the same logic: decrease supply when the price falls, increase supply when the price rises.

Taking Ampleforth as an example.

Ampleforth (AMPL) is a decentralized stablecoin project on Ethereum and one of the earliest projects to implement the Rebase mechanism. The circulating supply of AMPL adjusts once every 24 hours—that is, one Rebase—to keep the price at $1 .

Just as currency issuance dilutes asset prices, when AMPL’s price exceeds $1 , the circulating supply during Rebase expands, reducing the value of each AMPL token; conversely, if the price drops below $1 , the supply decreases during Rebase, increasing the value of each token.

The results of Rebase are propagated to all Ampleforth wallets, with their wallet balances adjusted proportionally.

It is important to note that AMPL holders own a “fixed proportion of the total circulating supply,” not a fixed number of AMPL tokens. Therefore, regardless of Rebase, AMPL holders retain the same proportion of the token supply. From the holder’s perspective, the number of AMPL in their wallet changes every 24 hours, but due to the rebase mechanism, the total value of their AMPL wallet remains unchanged.

Here’s a simple example for further understanding:

Suppose there are currently 100 AMPL in circulation, and you hold 10, which is 10% of the total circulating supply. Imagine that, due to a sudden increase in market demand, AMPL becomes scarce and its price doubles from $1 to $2. In this case, during the next Rebase, the network will increase the supply by 100 AMPL, and your wallet’s AMPL count will change from 10 to (100+100)*10%= 20 tokens, but the actual value of your holdings theoretically does not change.

While most cryptocurrencies have changes in circulating supply, they differ fundamentally from rebase tokens. For example, Bitcoin’s circulating supply is predetermined by a fixed algorithm, whereas the circulating supply of rebase tokens adjusts dynamically based on market prices.

For more information on Bitcoin’s circulating supply, please refer to: What is Bitcoin Halving

The meme coin project Shiba Inu also once attempted to enter the rebase token field. The project issued LEASH as a rebase token, pegged to the price of Dogecoin (DOGE) at a ratio of 1/1000. Specifically, if DOGE’s price is $0.50, then LEASH’s price would be $500. This means SHIB ecosystem participants could benefit from DOGE price movements through LEASH without directly investing in DOGE, thereby attracting more users to join the ecosystem.

Ultimately, the SHIB team decided to abandon the rebase property of LEASH, and their plan to “vampire” Dogecoin was also declared dead. For more information on the SHIB ecosystem, see: What is Shiba Inu (SHIB)—Striving to Shake Off the Meme Label of Meme Coins

Currently, the participation in the rebase token field remains limited. Besides the abandoned LEASH, some leading rebase tokens like Base Protocol’s BASE and Yam Finance’s YAM have also not developed favorably—why is that?

Limitations of Rebase Tokens

For users, the main benefit of holding rebase tokens is gaining stability in value within the highly volatile crypto market. This is a property similar to stablecoins and is attractive to those who need to use cryptocurrencies as a medium of exchange or store of value.

It may seem very appealing, but from another perspective, since the goal is to pursue stable value, why not just choose USDT directly?

LEASH appears to offer another benefit: indirectly earning from the price movements of another asset.

Setting aside whether SHIB and DOGE, two meme coins, have more liquidity or a broader audience—if users want to profit from DOGE, why not just buy DOGE directly?

In summary, the biggest limitation of rebase tokens is that they offer a seemingly innovative new approach that provides an option users do not necessarily need. Moreover, because of their “innovative” nature, they are less friendly and less accessible in terms of concept understanding, further limiting their development. **$JTO **$STO **$KAITO **