What is a rebase token?
- Author
- CRYPTO PORT Editorial
- Published
- Updated
- Reading time
- 5 min
In short
A rebase token automatically adjusts every holder's balance rather than only the price. Because all balances change by the same ratio, each holder's share stays the same. Combined with apps that assume balances never move on their own, it can behave in unexpected ways.
Key points
- Holder balances are adjusted automatically
- All change by the same ratio, so shares are unchanged
- Internally it tracks units and derives the balance
- Interacts badly with apps that assume fixed balances
Definition
A token whose total supply is adjusted periodically or on a trigger, with the change applied proportionally to every holder's balance without any transfer taking place.
An ordinary ERC-20 returns a stored number as the balance. A rebase token stores shares instead, and balanceOf computes a balance from those shares and the current total supply. Changing one supply factor therefore moves everyone's balance at once.
It is used to reflect staking rewards as a growing balance, and in supply-adjusting designs that try to steer a token toward a reference level by changing quantity rather than price. The first removes the need to claim rewards; the second aims at convergence through supply.
The practical hazard is composability. Some liquidity pools and lending protocols never anticipated a deposited balance changing on its own, so accrued amounts can become unrecoverable or accounting can drift. Whether a given protocol supports rebasing tokens has to be checked in its own documentation.
Watch out for
- · A larger balance with an unchanged share is not, by itself, a gain
- · Deposited into a protocol that does not support rebasing, the accrued amount may be unrecoverable
- · Tax treatment can depend on the nature of the adjustment, so keep records of it