Base Protocol aims to be a crypto industry index, its elastic supply token BASE is pegged to the total market cap of all cryptocurrencies. Here we will look at what is Base Protocol, how the rebasing mechanism works, and explain use cases in DeFi for BASE token.
What is Base Protocol?
BASE is a synthetic asset which aims to peg its price to the total market cap of all cryptocurrencies. Essentially, by holding BASE token you can speculate on the entire crypto industry. As a result, no need to spend hours researching different coins, sign up to various crypto exchanges, and install multiple different wallet software – with BASE you can do all that with just one token.
You could think of it more as buying a tokenized market tracker than buying into a traditional index fund. Historically, we know that index funds have outperformed any form of actively managed mutual funds. This is why we see such interest in bringing them over to cryptocurrency markets: Axia Protocol, PieDAO, or DEXT – just to name a few.
BASE allows for experienced crypto traders to instantly diversify and hedge their portfolios. Furthermore, it facilitates onboarding for beginners and retail investors by exposing them to the growth of all the digital assets on the market. Additionally, because BASE leverages the power of blockchain there are no brokerage charges or entry/exit fees. To summarize, the idea is simple: enable everyone to easily access the benefits of the entire cryptocurrency market.
How does rebasing work?
BASE is what is known as an elastic supply token. Meaning it can dynamically adjust its token supply to keep its price peg intact. The target price is one-trillionth of the total market capitalization of all cryptocurrencies. And the data to determine market cap calculations is securely sourced via a Chainlink oracle. If the price of BASE is under the target then a contraction rebase will happen. Vice versa, if the price of BASE is above the target then an expansion rebase will happen.
- Construction: destroys supply to increase scarcity and drive the price up.
- Expansion: increase supply to decrease scarcity and drive the price down.
If you would like to read through the full formula that goes into the market cap target calculations, you can find them in the project’s litepaper. At a high level, the rebasing mechanism is very similar to Based Money or Vampire Protocol.
BASE Token Use Cases
I can see what you’re thinking: there is a lot of vaporware and useless projects out there – why expose my portfolio to them? Well, the answer is there is a certain beauty to keeping things simple – especially for crypto novices. It would not be possible to manage a portfolio or crypto industry ETF with thousands of assets. Plus it would face regulation and centralization concerns: who manages which assets are in the index? Which countries can invest in it? With BASE you have a transparent and decentralized solution that is verifiable by anyone.
Keeping it simple… Imagine your first investment turned out to be a rug pull, you would probably ditch blockchain entirely. Base Protocol’s mission is very clear: become the primary channel for crypto investing to drive new adoption in the blockchain sector.
- Token holders can also participate in the Cascade liquidity program. This is a farming initiative to reward holders who provide liquidity on Uniswap and stake their LP tokens.
Looking to the future: BASE recently hit over $100M 24h trading volume on Uniswap which indicates traders are happy to speculate in this way. The team is pushing for further DeFi integrations such as being listed on lending platforms. Along with a teaser that their development team is planning a Vault product of some sorts. Expect this meteoric rise to continue!