What is Rebase in crypto - Explained!
Tags: web3, webdev, codenewbie
Published: 2021-10-31 12:06:35

## Rebase
is a token or a protocol that adjusts **circulating supply** automatically or periodically in response to price fluctuations.`

### Short History
So...  
Last week when I was skimming through some crypto news an article grabbed my attention which is about a new token project [upcake(UPC)](https://coinmarketcap.com/currencies/upcake/) ( *ofcourse we are witnessing hundreds of launches every single day 😅* ) & about it's trend in  [coinmarketcap ](https://coinmarketcap.com/) and  [twitter](https://twitter.com/RajsekharGuptha)  

That one word which grabbed my attention is **rebase** (bcoz it was new for me ).So, I went through the project  [whitepaper ](https://coinmarketcap.com/currencies/upcake/) in detail, and found simple explanation for that. But I was not quite satisfied and wished to know about it completely 😃

### Digging deeper

 So I started research with a simple Google search (as always), found some articles and went through them, afterwards I started **tracking** the  [Upcake (URC) token](https://coinmarketcap.com/watchlist/617a1d5abcc7543902b5ebc9) as an example in addition to that also went through some interesting (not really 😁) responses given by the dev team to users queries in their community forum

### What did I find ???


*Spoiler Alert* ❗

> 
A **bonus** tip is hidden 😉 in the content down 👇

### What is Rebase..?

  
* Rebase is basically adjusting circulating capacity i.e decrease by burning out the tokens or increase by adding tokens to supply - including all holder's and LP's holding tokens count. This is done in order to **adjust the token price, without affecting the value of anyone's share of coins**. This increase or decrease in supply works with a mechanism that adjusts the supply **algorithmically**


### Example Time 
Let our brains grab the above definition with an example
> Let's say at some time *x* , circulating Supply is ***1,00,000*** tokens And you hold ***1000*** tokens each of value ***1$***.
* Let us assume that **negative rebase** happened by 10%
* Now the supply will be **90,000** tokens and your holding count will be ***900*** with each token valuing to ***1.12***$ (expected ideal price but in reality it varies depending on various factors)
$$
1,000 X 1$ = 900 * 1.12$
$$
* But here, ration of your tokens to total supply will be remained constant
* 
holding/supply before rebase = holding/supply after rebase
$$  
1,000 / 1,00,000 = 900/90,000
$$

### Practical Ways
Expecting that the above said theoretical definition is clear
let's see two real world **implemented** definitions 
* By  [Ampleforth (AMPL)](https://coinmarketcap.com/currencies/ampleforth/) 
> The automatic supply adjustment process known as a **rebase** occurs once each day, with a positive rebase if the price goes above $1.06, and a negative rebase if it is below $0.96. The overall goal of the system is to create incentives that drive the market price of AMPL back to ~$1.
* By  [UpCake(UPC)](https://coinmarketcap.com/currencies/upcake/) 
> On an hourly basis, the overall supply of our token will be reduced by a pre determined % impacting everyone in the ecosystem

### Why Rebase?
Why many projects are now using rebase,
* #### The Marketing Benefit
As the supply been reducing towards an ideal figure, the price of the token keeps on increasing more and more when compared to normal coins, there are 2 advantages by this
  1. % increase in price of token is incredible and it makes **price chart** looking good which may attract people to buy 
  2. Also bcoz of this, these coins may trend on platforms like [CoinmarketCap](https://coinmarketcap.com/) which may grab attention of many users worldwide which intern increases exposure by people speaking about the token
* #### Elastic Supply
this elasticity in supply may result in constant long term growth

### Bonus tip 🥳

When you invest or tracking some Token based on *rebase tokenomics*,  it's like hell  to do these calculations every time you wanted to know change in price 

So the tip is observing **Market Cap(MC)**
,note down the market cap initially then ,

* When MC is ⬆️ above your last value 🔺 you are in *profits now* 🥳🥳💸
* Market cap is  ⬇️ below the noted level 🔻 you have to wait to *see the moon* 🌒😅

### Downside
For users, definitely there is a downside
Here, as already seen above the tokens price may keep on increasing constantly but this **% up in the token's price  is not at all your profit** it may become profit but not all the times.
Let us consider the same example as mentioned above 
> token's price is 12% up from 1$ to 1.12$ but there is no profit for you as no. of tokens decreased proportionally

You will be in profits, iff the % increase in price is more than enough to compensate the decreased tokens + give you profit

One have to mind this that **MarketCap** is correct **indicator** than the **price** change when tracking these type of tokens.

### Inspiration


> A friend of mine invested in a token built on rebase without knowing about this protocol and he got panic when he actually saw that the num of tokens he held  decreased  & also tokens value was slight down while token price increased by some % and he thought that he was scammed and blamed the dev team in their community forum😅
So I thought of writing this

### Will rebase be the future ??
We can definitely witness many more projects using **rebase** technique, also they may trend asap after their launch bcoz of the above explained marketing technique but what we have to *still know* is *Will users be able to make profits more than by believing standard coins* 
comment down 👇🏻👇🏻