What Are the Advantages of an Elastic Supply Model?
The primary advantage of an elastic supply model is its ability to maintain a stable price. By adjusting the supply in response to demand, rebase tokens can theoretically avoid the extreme volatility that is common in the cryptocurrency market.
This can make them more suitable for use as a medium of exchange or a store of value. Additionally, the rebase mechanism can create interesting economic incentives for traders and liquidity providers.
Glossar
Economic Incentives for Traders
Design ⎊ Economic Incentives for Traders are the carefully constructed reward mechanisms, such as fee sharing, governance rights, or yield generation, embedded within a protocol to encourage specific desirable behaviors.
Elastic Supply
Supply ⎊ The concept of elastic supply, within cryptocurrency derivatives and financial engineering, describes a responsiveness of the available asset quantity to price fluctuations.
Elastic Supply Model
Model ⎊ The elastic supply model is a monetary design where a cryptocurrency's circulating supply is algorithmically adjusted in response to price fluctuations relative to a target peg.