Hello fellow badgers, can someone help me understand the rebasing process? I have tried reading and i know it is not advisable to invest in something we do no understand so for all you SME’s out there, can someone spend a few mins explaining. I understand Digg is pegged to value of bitcoin. Now i see we are on a negative rebase streak since bitcoin is gaining in value compared to Digg. This rebase happens everyday and i see Digg is set up for another negative rebase, how is that calculated when the 24 hour percentage gain of Digg is higher than bitcoin? I am probably missing something but it will be nice to know. I have no issues with the protocol or community and glad i jumped in in the early stages. Looking forward to greater things. Cheers

Hey bud, understanding rebasing tokens is not easy, so I’ll try to explain as succinctly as possible:

- When a token is below/above peg, it will decrease/increase supply until it is within 0.95-1.05 price of its peg. Since BTC is volatile, you can expect a lot more days of rebasing until DIGG’s market cap grows and it takes more capital to move it off peg.
- The rebase amount is the % from peg extended out over 10 days. So if the price of DIGG is 100% away from BTC, the supply will rebase 10% over the next 10 days. If the next day the price is 90% away, the rebase will only be 9%. The % is calculated using TWAP, or time weighted average price.
- The rebases are designed to help encourage buying when the price is undervalued and selling when the price is overvalued. So here is a little math example: Current supply is 3k, price is 40K, peg is 60K, and MC is 70 mm. The market cap should be 120 million (supply*price). However, the price is below peg, and the market cap is below where it should be, therefore we are in negative rebase, decreasing supply until we get to peg. A natural peg would be more like supply is 2K, price is 60K, peg is 60K, and MC is 120 mm. If any of these factors change (a sudden boost/drop in marketcap, price in DIGG or BTC) then these numbers all readjust, hence making it even more complex to calculate.
- When all is said and done, the safest way to value your position is know how much money you invested and what the marketcap was at the time you invested. If you bought 1% of the mc, and it goes from 70mm to 700mm, then your 1% will be worth 10X more, not including supply expansion due to the price being above BTC. This also works in the reverse: you bought 1% at 120mm mc, mc goes from 120 mm to 12mm, and your position is worth 10X less, not including contraction of supply.

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Thank you for the explanation. Appreciate it -

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Thanks. That helped me to understand rebasing a little more.

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