# How Does a Rebase Mechanism Work in Practice? ⎊ Path

**Published:** 2025-12-04
**Author:** Greeks.live
**Categories:** Path

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## How Does a Rebase Mechanism Work in Practice?

A rebase mechanism works by increasing or decreasing the number of tokens in every holder's wallet. This is done through a smart contract that automatically adjusts the supply based on a predetermined formula.

The rebase can be triggered by a specific time interval or by a change in the token's price relative to a target price. The goal is to maintain a stable price peg.

The value of each token changes, but the total value of a user's holdings should remain proportional to their share of the total supply.

- [What Is the Impact of Rebase Frequency on the Volatility of a Rebase Token?](https://learn.greeks.live/path/what-is-the-impact-of-rebase-frequency-on-the-volatility-of-a-rebase-token/)

- [How Do Exchanges and Wallets Handle the Display of Rebase Tokens?](https://learn.greeks.live/path/how-do-exchanges-and-wallets-handle-the-display-of-rebase-tokens/)

- [Can the Target Price of a Rebase Token Change over Time?](https://learn.greeks.live/path/can-the-target-price-of-a-rebase-token-change-over-time/)

- [What Role Do Smart Contracts Play in the Rebase Process?](https://learn.greeks.live/path/what-role-do-smart-contracts-play-in-the-rebase-process/)

- [How Frequently Do Rebase Events Typically Occur?](https://learn.greeks.live/path/how-frequently-do-rebase-events-typically-occur/)

- [How Does the Taxation of Rebase Tokens Differ from Other Cryptocurrencies?](https://learn.greeks.live/path/how-does-the-taxation-of-rebase-tokens-differ-from-other-cryptocurrencies/)

- [Are There Any Rebase Tokens That Have a Continuous Rebase Mechanism?](https://learn.greeks.live/path/are-there-any-rebase-tokens-that-have-a-continuous-rebase-mechanism/)

- [How Can Users Verify the Code of a Rebase Token’s Smart Contract?](https://learn.greeks.live/path/how-can-users-verify-the-code-of-a-rebase-tokens-smart-contract/)

## Glossar

### [Rebase Token](https://learn.greeks.live/area/rebase-token/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)

Algorithm ⎊ Rebase tokens operate through a dynamic supply mechanism, adjusting the circulating token quantity based on a predetermined algorithmic function, often tied to price fluctuations or time-based schedules.

### [Rebase Mechanism](https://learn.greeks.live/area/rebase-mechanism/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)

Mechanism ⎊ A supply adjustment technique where the total number of outstanding tokens is proportionally altered across all holders based on a predetermined algorithmic rule set.

### [Rebase Events](https://learn.greeks.live/area/rebase-events/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)

Event ⎊ Rebase events, within the context of cryptocurrency derivatives and financial instruments, represent algorithmic adjustments to the circulating supply of a token, typically designed to maintain a target price or peg.

## Discover More

### [How Does 'Delivery' Work in a Cash-Settled Futures Contract?](https://learn.greeks.live/path/how-does-delivery-work-in-a-cash-settled-futures-contract/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![How Does 'Delivery' Work in a Cash-Settled Futures Contract?](https://learn.greeks.live/wp-content/uploads/2025/10/Teal-Encapsulation-of-Digital-Asset-Securitization-Mechanism-and-Option-Hedging-Exposure.webp)

No Physical. Cash Difference. Indices checkmark.

### [How Does an Automated Market Maker (AMM) Work?](https://learn.greeks.live/path/how-does-an-automated-market-maker-amm-work/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![How Does an Automated Market Maker (AMM) Work?](https://learn.greeks.live/wp-content/uploads/2025/10/Precision-Machined-Actuator-Hub-Mechanism-Reflecting-Decentralized-Finance-Governance-Token-Architecture.webp)

Uses a mathematical formula (like x times y equals k) to price assets against a liquidity pool instead of an order book.

### [What Is the Difference between a Rebase Token and a Liquid Staking Token?](https://learn.greeks.live/path/what-is-the-difference-between-a-rebase-token-and-a-liquid-staking-token/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![What Is the Difference between a Rebase Token and a Liquid Staking Token?](https://learn.greeks.live/wp-content/uploads/2025/10/Decentralized-Exchange-Liquidity-Pool-Split-Illustrating-Bifurcated-Asset-Pricing-Mechanisms.webp)

A rebase token adjusts its supply to control price, while a liquid staking token represents staked assets to provide liquidity.

### [How Is Implied Volatility Calculated in Practice?](https://learn.greeks.live/path/how-is-implied-volatility-calculated-in-practice/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![How Is Implied Volatility Calculated in Practice?](https://learn.greeks.live/wp-content/uploads/2025/10/Layered-Synthetic-Material-Geometry-Suggesting-Collapsed-Volatility-Surface-In-Decentralized-Derivatives-Protocols.webp)

IV is back-solved from the option's current market price using a pricing model like Black-Scholes, with all other inputs known.

### [How Does Proof-of-Work (PoW) Consensus Hinder Scalability?](https://learn.greeks.live/path/how-does-proof-of-work-pow-consensus-hinder-scalability/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![How Does Proof-of-Work (PoW) Consensus Hinder Scalability?](https://learn.greeks.live/wp-content/uploads/2025/10/Decentralized-Finance-Protocol-Governance-Token-Staking-Mechanism-Convergence-High-Frequency-Trading-Node.webp)

PoW is slow because it requires extensive computational competition and full node verification, limiting the rate of new blocks and thus throughput.

### [What Is the Primary Purpose of a Proof-of-Work Consensus Mechanism?](https://learn.greeks.live/path/what-is-the-primary-purpose-of-a-proof-of-work-consensus-mechanism/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![What Is the Primary Purpose of a Proof-of-Work Consensus Mechanism?](https://learn.greeks.live/wp-content/uploads/2025/10/Conceptual-Architecture-of-Decentralized-Autonomous-Organization-Governance-Staking-Mechanisms-Illuminated.webp)

PoW secures the network, achieves decentralized consensus, and prevents attacks by making malicious control economically unviable through energy expenditure.

### [How Does the 'Difficulty Adjustment' Mechanism Work?](https://learn.greeks.live/path/how-does-the-difficulty-adjustment-mechanism-work/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![How Does the 'Difficulty Adjustment' Mechanism Work?](https://learn.greeks.live/wp-content/uploads/2025/10/Modular-Articulation-Point-Visualizing-Cryptocurrency-Derivatives-Execution-Mechanism-Precision.webp)

Adjusts 2016 blocks. 10 min. uparrow Hashrate → uparrow Difficulty.

### [How Does the "Fraud Proof" Mechanism Work in an Optimistic Rollup?](https://learn.greeks.live/path/how-does-the-fraud-proof-mechanism-work-in-an-optimistic-rollup/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![How Does the "Fraud Proof" Mechanism Work in an Optimistic Rollup?](https://learn.greeks.live/wp-content/uploads/2025/10/Tangible-Manifestation-of-Tokenized-Asset-Allocation-Within-High-Frequency-Trading-Architecture.webp)

Fraud proof allows a participant to challenge an Optimistic Rollup block. If proven fraudulent, the block is reverted and the malicious validator is slashed.

### [How Does Margin Trading Work in Derivatives?](https://learn.greeks.live/path/how-does-margin-trading-work-in-derivatives/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![How Does Margin Trading Work in Derivatives?](https://learn.greeks.live/wp-content/uploads/2025/10/Quantum-Entanglement-Lens-Reflecting-Impermanent-Loss-Dynamics-in-Decentralized-Finance-Yield-Farming.webp)

Trading with borrowed funds using capital as collateral to amplify returns and risk.

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**Original URL:** https://learn.greeks.live/learn/how-does-a-rebase-mechanism-work-in-practice/
