Clear DefinitionsElastic Supply Token
1 min read
Pronunciation
[ih-las-tik suh-ploy to-ken]
Analogy
An elastic supply token is like a thermostat that heats or cools a room to maintain a set temperature.
Definition
A token whose total supply automatically expands or contracts in response to price deviations, aiming to stabilize its market value.
Key Points Intro
Elastic supply tokens stabilize value via:
Key Points
Rebase operations: Supply adjusted periodically based on price oracle.
Proportional balance changes: All wallet balances scale by the same factor.
No user action: Automatic on‑chain supply updates.
Peg mechanism: Targets a reference price (e.g., $1 USD).
Example
Ampleforth (AMPL) rebases daily: if price > $1, totalSupply increases; if $1, supply decreases.
Technical Deep Dive
Rebase contract reads price from oracle, computes `delta = (price – target)/target`, then calls `token.rebase(delta)`. Token’s internal `gonsPerFragment` factor updates so that `balance = rawBalance / gonsPerFragment` adjusts automatically. `totalSupply` tracked in token contract.
Security Warning
Rebases can break DeFi positions and cause unexpected balance changes; integrate with caution.
Caveat
Elastic supply can confuse users and break assumptions in smart contracts about fixed balances.
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