Chico Crypto Deep Dives Into Benchmark Protocol's Rebase Token
A Rebase token... Rebasing or elastic and a changing supply token. That is what the Benchmark Protocol’s MARK token is all about. It’s a concept that ever since Ampleforth deployed, has gained huge amounts of following and traction within the crypto space. Target prices and equilibrium is found by expansion or contraction in the supply of the token.
So how does Benchmark protocol improve upon this? Well first we need to understand ample and how it differs. In Ampleforth, the monetary protocol automatically adjusts the supply of AMPL across all user wallets based on price. This means the number of tokens owned changes based on market conditions. When the price is high wallet balances automatically increase. When the price is low wallet balances automatically decrease.
And Ampleforth is trying to track the US dollar, it's a stable rebase token, which creates a very specific inflation risk profile for the asset.
MARK has a global inflation risk profile, as it tracks itself to the SDR, or Special Drawing Rights, a unit of monetary account created by the IMF. Going to the IMF's website on the SDR it’s composed of 5 currencies, with different weights. The US Dollar, Euro, Chinese Yuan, Japanese Yen, and the Great British Pound, and as we can see as of yesterday, 1SDR, is about 1 dollar and 42 cents!
Benchmark Protocol is a supply elastic collateral and hedging device that revolves around the volatility index. Their token MARK allows for staking, governance voting, and yield farming via their incentivized liquidity pools.
The target price of 1 MARK is equal to 1 SDR, 1.42 cents right now. Deviation of the market price of MARK from the target SDR price triggers a supply adjustment or rebalance. This adjustment is applied as percentages over a dynamic smoothing period.
And now, here is where things get fun with the BenchMark protocol. Benchmark also rebases or adjusts by tracking the movement of the VIX volatility index on CBOE. The daily change in closing price of the VIX is layered into the rebalancing algorithm.
What is the VIX on the chicago board options exchange CBOE? The most frequently traded, exchange-listed volatility futures contract in the world built around the S&P500 & also known as the fear index. But you shouldn’t fear it, as it provides market participants the opportunity to trade their view of the future direction of the S&P 500 index. Up or down. If the VIX value increases, it is likely that the S&P 500 is falling, and if the VIX value declines, then the S&P 500 is likely to be experiencing stability.
So how does this affect MARK tokens? Well, when the VIX in traditional markets increases. The total supply of MARK increases. Increasing supply when traditional markets are down in the S&P. Why is this done? Well an increase in the VIX usually indicates an increase in selling pressure. If an asset is scarce during such periods, asset prices can be manipulated by a few bad actors. To counteract that risk, the protocol adds more units of supply.
Thus MARK adjusts the network supply, to meet the demand of the markets. The Markets need a stable asset when things are falling and it wouldn’t be good if the stable asset they needed wasn’t available!!
Mark and the benchmark protocol provides many benefits over other stablecoins and other rebase stable assets. Elastic, Global Currency Peg, no collateral, volatility adjusted rebase, inflation shielded, public team, and a fair launch!
Benchmark also has a liquidity mining program called the PRESS. Putting the stable assets to work! Two live and solid Uniswap LP pools, with crazy APYs of 250 percent plus. They have Balancer pools, with very respectable APYs too and even in app staking with Xmark.
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