The protocol uses Chainlink as an oracle to determine the AMPL rate, while the rebase mechanism is activated daily. The approach implemented by Ampleforth reduces the impact on token correlation with outside assets. To this end, the project’s first rendition was a failure as a yield and governance experiment.
Elastic supply tokens comprise a rising sector of DeFi that’s seeing rapid iteration lately. For some, these projects don’t provide meaningful or productive additions to the current landscape of digital money. For others, price-elastic projects are cryptonative innovations that pave the way to new kinds of finance. Ultimately, rebases are designed to be tradable, and thus potentially profitable, events. However, the nature of rebases means that gains or losses can be compounded when investing in price-elastic tokens. As a completely new and unknown project, Yam had achieved 600 million dollars of value locked in its staking pools in less than two days.
The same effect is seen in a downtrend; you lose price value and lose the amount of total holding as each rebase occurs setting a spiral of negative rebases. This is the worst-case scenario in which the supply changes are unable to increase demand and re-stabilize the price and market cap. The target price of Ampleforth’s AMPL token is $1.009 in accordance with the U.S. dollar’s 2019 Consumer Price Index rate, and the project’s rebases take place daily at 2am UTC. Ethereum’s decentralized finance arena has many rising sectors, including non-custodial exchanges, stablecoins, tokenized bitcoin, and more. Similarly, with a price decrease, the project’s total supply is decreased accordingly to move the price up.
The Weakness of Elastic Supply Tokens
Elastic supply tokens are one of the innovations to watch in DeFi. As we’ve seen, these are coins and tokens that can algorithmically adjust their supply to try and achieve a target price. However, due to a bug in the rebasing mechanism, much more supply was minted as planned. The project was ultimately relaunched and migrated to a new token contract thanks to a community-funded audit and joint effort. What’s particularly interesting about this scheme is its duration.
Getting more involved in the learning of the DeFi sector is a must before venturing into the new territory. Sure, there are overnight millionaires, as we have seen with Doge, but the losers seldom get a mention. The value proposition offered by rebase tokens is probably worth it, but its future is still under speculation as every nascent idea faces many hurdles before actually becoming promising. Elastic supply tokens, also known as rebase tokens, work on the fundamental concept of demand and supply that when supply increases, the value of an asset comes down, and vice versa.
Bitcoin is designed this way to motivate mining and control the issuance of new tokens entering circulation, not to control the bitcoin price. A few examples of elastic supply tokens are Ampleforth ($AMPL), YAM Finance ($YAM), BASE Protocol ($BASE), and DeFi 100 ($D100). The total supply of the project happens to be adjusted with its price increment, making the supply increase accordingly.
The randomization is meant to mitigate “market manipulation” related to the timing of rebases. This model stands in contrast to Ampleforth, whose rebases are explicitly meant to be arbitrage events. A price-elastic token is one where the project’s total token supply is not fixed, but instead automatically adjusts on a routine basis. The basis of stablecoins is a fixed exchange rate principle, which keeps a stable price by pegging the coin price to another physical asset. While technically a stablecoin, the AMPL price chart shows you how volatile elastic supply tokens get. The idea is that instead of price volatility, what changes is the token supply through events called rebases.
At this point, Yam’s builders quickly set up a delegation UI so that YAM holders could vote on a governance proposal to fix the rebase issue. However, the proposal failed and the ensuing rebase rendered Yam and its $750,000 yCRV treasury ungovernable. The project is a relatively new one, in that its whitepaper dates to May 2019 and the AMPL initial token offering launched on Bitfinex’s Tokenix platform that summer. The Ampleforth team raised just under $5 million in less than 15 seconds during the sale. Within two months of the offering, AMPL was listed on Uniswap and Bancor and slated for inclusion in Compound, and the project’s been on the rise ever since. The unique mechanism behind them allows for a lot of experimentation.
2% will be automatically added to the liquidity pool, ensuring that the price stability is sustained. The Immutable gaming platform already has the zk-rollup Immutable X, based on StarkWare technology. Immutable zkEVM will be the first Ethereum Virtual Machine -compatible zk-rollup for games that has enforceable royalty fees for game developers, according to an Immutable blog post. It will be possible for users to choose from a variety of assets to deposit.
Defining Elastic Supply Tokens
Following the same idea with a cost reduction, the total supply happens to reduce accordingly for moving the price up. Now, the big question is, why did elastic supply tokens even exist in the first place? To begin with elastic supply tokens, we need to know why there was ever a need for them and the sector they belong to, i.e., Decentralized Finance. Decentralized finance has brought new types of blockchain-based financial products into the cryptocurrency space. One such innovation in creating new asset classes is so-called “Elastic Supply Tokens” , which will be discussed in today’s article.
As per protocol, once Granary V2 launches, Granary Finance will scale up incentivization strategies, with a portion of the rewards going to staking pools. The LGE will distribute 12.5% of the $GRAIN supply based on user contributions proportionate to their contribution size and vesting terms. Those who choose to vest will receive their $GRAIN on a linear basis, distributed evenly every quarter for the duration of their vesting period. Each network will have its own LGE contract that supports different tokens for contributions.
These token supply adjustments, called “rebases,” take place per market demand and are done in such a way that users’ proportional holdings ultimately don’t change and thus aren’t diluted. Rebases are performed per a specific target price, with the idea being that a token’s nominal price will steadily be moved over time toward its target, e.g. $1 USD. Another reason why investing in elastic supply tokens may be risky is that they are an experimental asset that increases the chances for projects to have bugs in their smart contract code.
GRAIN Sale Heats up as Granary Finance’s LGE Event Goes Live
Along with the recent spike of activity around DeFi in general, Ampleforth has seen an uptick in activity lately thanks to kicking off its “Geyser” liquidity mining campaign this summer. One of the more interesting aspects of this offering is its duration. While some recent DeFi projects have run liquidity mining campaigns that were weeks-long, Ampleforth’s Geyser is structured to distribute rewards to participants for the next 10 years. Liquid offers high-performance API, deep liquidity, some of the most unique trading experiences in the industry with a wide variety of assets, all in one platform. Elastic supply tokens refer to an asset whose supply depends on its price and changes accordingly.
The primary concept behind the idea highlights that the value of elastic supply tokens stays stable. They are usually considered identical to stablecoins because of their desire for keeping the value stable. But, there are pretty primary differences between the two of them. Suppose you have 100 elastic supply tokens whose targeted value is $1 each. During the process, the percentage of overall supply you own will remain the same.
With a price target of $1 USD, REB rebases every 12 hours, once at 9am CET and once at 9pm CET. Initially, the project started out with a total supply of 2.5 million REB and a circulating supply of 2 million REB. Now, there are more than 2.25 million of the tokens circulating in the cryptoeconomy. Unlike stablecoins, elastic supply tokens don’t necessarily try to eliminate the volatility.
On the contrary, elastic supply tokens are considered as an experimental asset that enhances the possibilities for token supply projects to possess bags within their smart contract code. It is another reason why you should consider your investment in elastic supply tokens as risky. To understand the concept of elastic tokens, let’s discuss this example. Let’s say you have 100 ETH in your wallet at a given time when each token is worth $5 (a total of $500 worth of ETH). In this case, if the value of each token increases to $10, the supply adjustment will automatically contract and apply, essentially leaving only 50 tokens in your wallet.
Likewise when the price is below $1, the supply of AMPL contracts — assuming people will buy and drive the price back to $1. In actuality, the AMPL project was only partially successful in achieving its goal. A rebase, or how it is sometimes called elastic , is a cryptocurrency whose supply is algorithmically adapted to control its price. It’s similar to stablecoins, so rebase tokens are usually pegged to another asset.
The project team has purchased this advertisement article for $1500. While the thought of making insane gains is quite stimulating and interesting, that should not be the sole intention when purchasing rebase token. Investors are advised to fully understand what they are investing in. It’s super important to know what the rebase target is for a coin with rebase mechanics before investing/buying; setting your expectations right will ensure you do not lose your funds immediately.
Ignore Fud boasts a community-centric meme ecosystem and a distinctive hold-to-earn feature, which enables investors to earn rewards by holding its native token “4 Token”. Additionally, investors gain exposure to a vast and robust user community from across the globe. Rebase tokens are a type of commodity market bringing with them commodity market properties into the cryptocurrency space. Some of the most popularly traded commodities are Gold, Silver, Corn, Oil among a plethora of others. However, in rebase tokens, they can track the overall market in the cryptocurrency market or its own market and adjust their supply as price changes to keep the peg price while value increases. Another clear distinction with stable coins is that while stable coins are somewhat semi-fixed supply coins .
We are excited and honored to have launched with the full support of Ampleforth and their team. The last aspect of rebasing tokens that we will cover in this article is that they are non-dilutive — meaning that when a rebase occurs, a given user’s %-ownership of the Market Cap remains unchanged. For example, if a user owned 0.1% of the supply, they will still own 0.1% of the supply after the rebase.
Most importantly, DIGG utilizes a non-dilutive and continuous rebase mechanism, ensuring transparency and fairness for all involved! If you own 1% of the DIGG supply, you will always own 1% of the DIGG supply regardless of supply changes — unless of course, you exit or change your position. If you decide to invest in an elastic supply token, your investment might be considered risky. When it comes to elastic tokens, the possibility of losing your funds might be higher. Certainly, it can boost your gains on the upside, however, it also can amplify your losses.
As you can see, the same demand and supply logic applies here to drive the project’s total token supply. This article covers the concept behind elastic supply tokens, why we need them, how they work, and more. Are elastic supply tokens only an interesting experiment, or will they gain significant traction and carve out their niche? That’s difficult to say, but there are certainly new DeFi protocol designs in development that attempt to take this idea further. Since they’re quite tricky to understand, investing in rebasing tokens will likely result in a loss for most traders. Only invest in elastic supply tokens if you can fully grasp the mechanisms behind them.