What is “Rebasing”? - Crypto in Plain English - Episode 265 - by cryptohunt.it

What is “Rebasing”?

Welcome to the Cryptohunt Jam, where we spend one minute a day to explain crypto. In plain English. My name is Christian Byza, Co-Founder of Cryptohunt.it and I am your host of this daily show.

Today we talk about Rebasing, a clever mechanism that makes stablecoins stable. So how does it work?

It’s all about taking advantage of a little, yet powerful psychological trick that drives almost every major economic trend: Creating abundance and scarcity.

But let’s take a step back and think ahead: Thanksgiving will be here soon. Now - imagine sitting down for dinner with your entire family, and the turkey comes out: Juicy, deliciously smelling, and ready to serve. And it’s a big bird – you’ll gladly pass it around the table, because clearly there is food in abundance for everyone. Take a slice more, who cares.

But then the inevitable happens: It turns out everyone’s appetite was large, and at the end of the meal there is only a single slice left. And even after countless slices of turkey, suddenly the thought creeps into your head: I hope I am the lucky one who gets it.

That’s abundance and scarcity at play. And they work the same with assets, such as Gold: There more there is, the less the market values it. The less there is, the more it is worth to people.

Stablecoin that use Rebasing make use of that trick. They target a specific value, for example that each coin is always worth $1, and have the ability to create and destroy some of their own supply. These two processes, which crypto people call minting and burning are controlled by the stablecoins’s code.

When the market price is too high, more coins get created and the price adjusts. When it is too low, coins are burned and the price increases.

Thinking about Thanksgiving again: It’s almost as if someone had the ability to magically make turkey appear on your dinner table. For the destruction of it, we are sure, you can think of more traditional means.

Disclaimer: This podcast references our opinion and is for information purposes only. It is not intended to be investment advice. Do your own research and seek a duly licensed professional for investment advice.