An elastic supply token pegged to the price of Bitcoin and governed by the Badger DAO.
Read more here: https://badger.finance/digg
For most assets as supply and demand change the price is driven by normal market forces. The supply is a fixed input (that can be changed for different reasons) but is generally held steady and increases or decreases in demand manifests in a decrease or increase in price. Elastic supply tokens (AMPL, YAM, BASED, ESD) are an experiment in changing this relationship and dynamically adjusting the supply as the price changes relative to a target.
Assume Elon Musk decided that the price of Tesla should always be $420. The demand for the stock would still waver up and down with expectations on success or failure of the company so how would he enforce this when its a free market?
As the price shifts above 420 more stock could be issued to all current holders. Everyone retains the same % of the total supply but for those looking to purchase the stock there is now more available to purchase. With demand being driven by external forces (and therefore static at any given point in time), an increase in supply should drive the prices down.
The inverse also applies for when the price is below $420, everyone's balance can be reduced, reducing total supply and ideally driving the price upward since there is less available for those on the demand side to purchase.
Rebasing is the mechanism that adjusts the supply of an elastic supply asset to promote price stability
There are generally the same parameters
Target price (this is taken from an oracle, badger has a custom oracle, looking into other solutions)
Current price (also taken from an oracle, likely referencing the most liquid dex pools)
Rebase Delay (minimum amount of time that has to have passed for a rebase to be called)
Rebase multiplier (What % of current supply should be minted/burned relative to different in current and target price. Hoe many cycles is it targeting to take to reach the intended price?)
DIGG is currently pegged to 1 BTC, and uses a custom oracle to determine the necessary change in supply. Other oracle solutions are currently being investigated as viable alternatives. If DIGG price is above 1.05 BTC, DIGG supply increases. This is known as a positive rebase. If DIGG price is below 0.95 BTC, DIGG supply decreases. This is known as a negative rebase. If DIGG price is between 0.95 and 1.05 BTC, DIGG does not rebase. Every DIGG holder gets the same increase or decrease in supply every rebase. However, this increase or decrease is offset by the subsequent increase or decrease in price.
DIGG does not try to target 1 BTC all at once, instead attempting to do it over 10 rebase periods (while the buffer is set to 10%). To calculate change in supply we need to determine how far from the peg the current price is. This formula is:
Deviation from peg = (Current Price - Target Price) / Target PriceRebase Amount = Current Supply * (Deviation From Peg/Rebase Multiplier)New Supply = Current supply + Rebase Amount
No. All approved liquidity pools are in sync with every rebase. Be careful to not add liquidity to pools not explicitly supported by badger as they may not be treated the same. Since all approved pools are automated market makers the price is a function of the relative balances in the pools. As soon as supply of one asset in a pool changes and the other does not the price the pool can sell or buy the assets relative to each other has changed. This means that if supply is increased by 20% in a rebase, price will drop 20% to offset it. Imagine the following scenario. DIGG is at $20,000 (1 BTC) and you hold .1 DIGG. This means your DIGG holdings are $2000. A rebase comes and it's a positive 20% rebase. You now have .12 DIGG but the price will go $16,667 so your DIGG holdings are still worth $20,000!