What is rebasing and how does it work? How is it different than airdropping?
Rebasing is a mechanism through which the total supply of tokens is adjusted. Rebasing works by taking the “base” number of tokens, T, and multiplying it by some “rebasing factor”, RF, to get a new number of tokens. For example, let’s say there were a total of 100 tokens: 10 were held by Holder A (10% of the total) and 90 by Holder B (90% of the total). In a rebasing, we might want to double the total number of tokens (i.e. a rebasing factor of 2). We multiply each holder’s balance by the Rebasing Factor — 2 in this case — so after rebasing a total of 200 tokens are outstanding in which Holder A has 20 tokens (still 10% of the total) and Holder B has 180 tokens (still 90% of the total). Economically, Holder A and Holder B are in the same position both before and after rebasing. How can we do this? One way would be to mint and airdrop new tokens to each token holder. This would cost a lot of gas, however, because it requires updating each token contract storage location that represents a user’s balance. Rebasing allows us to adjust all token holder balances in a gas-efficient manner by introducing the concept of user “shares”. A “share” is similar to a share of a company’s stock - it can be thought of as a claim on a percentage of the total supply of rUSDY tokens (and, in fact, the concept of rebasing is similar to the concept of a share split – except rebasing is automatic). A user’s balance is then equal to the percentage of total shares they hold, multiplied by the total number of shares:NumTokens_User = NumTokens_Total * (NumShares_User / NumShares_Total)When we rebase, therefore, we only have to update one contract storage location: NumTokens_Total. As you can see from the formula above, that will increase the balance in your wallet while keeping your percentage of the total tokens the same. Here’s an example where we increase NumTokens_Total from 100 to 200:| Holder A Shares | Holder B Shares | Total Number of Shares | Total Supply of rUSDY Tokens | Holder A rUSDY Balance | Holder B rUSDY Balance | |
|---|---|---|---|---|---|---|
| Before Rebasing | 1 | 9 | 10 | 100 | (1/10) * 100 = 10 rUSDY Tokens | 9/10* 100 = 90 rUSDY Tokens |
| After Rebasing | 1 | 9 | 10 | 200 (increase) | (1/10) * 200 = 20 rUSDY Tokens | 9/10 * 200 = 180 rUSDY Tokens |
NumTokens_Total to be? We set it equal to the Total Value Locked (TVL) of rUSDY as of the latest price update. In other words, we set NumTokens_Total = TVL, thereby making TVL / NumTokens_Total equal to $1.00.The rebasing factor RF, then, is calculated as RF = NumTokens_Total_New / NumTokens_Total_Old.We can use a simple example to check this. Let’s say that on Monday the total number of tokens after rebase (NumTokens_Total_Old) was 2 (implying an rUSDY TVL of $2.00). Let’s also say that at the end of Monday, the price of USDY increased to $2, so the TVL of rUSDY at the end of the day (TVL) was now $4. This implies that the Reference Token Price - the ‘face value’ of the rUSDY token price - is 4 dollars / 2 tokens = $2 per token. To make the Reference Token price per rUSDY token equal to $1.00 after rebase on Tuesday, we need to double the number of tokens. In this case, the RF would be 2 ($4/$2 = 2). As a result, because the number of rUSDY tokens doubled for everyone, the Reference Token Price per rUSDY token would be reduced to $1.00 per token.Finally, please note that when your rUSDY balance increases due to rebasing, you will see the balance increase in your wallet, but you will not see an accompanying transaction in your wallet’s activity or on a block explorer. This is because the tokens are simply being rebased rather than tokens being sent to the holder’s wallet.