Explanations of rebase mechanism of NFTFUN Protocol
FUN Protocol aims to capture the value of the DeFi world, and is committed to building a parallel world that follows the continuous prosperity of the NFT market. In this parallel world, there is an exclusive circulated token system, a network that constantly stimulates various NFT creations, and a governance ecosystem represented by NFT. In a world, NFTFUN Protocol plays an interesting and important role in the whole NFT world and overall, it includes three phases: FUN Money, FUN NFT, and FUN DAO.
Currently, our FUN team has created FUN Money. FUN Money(FUN) is a synthetic asset on the Binance Smart Chain (BSC), anchoring the total market cap of NFT (https://www.coingecko.com/zh/nft). Specifically speaking, FUNMoney is designed to keep token price being pegged at a ratio of 1:30,000,000,000 of total NFT market cap, and use the Rebase mechanism to change the number of tokens supplied to achieve target price equilibrium
How does FUN anchor the market cap of NFT to achieve stabilization?
1. Understanding the mechanism in a simple way
FUNMoney divides the entire system into 3 layers. First, participants can obtain the estimated total NFT market cap through the oracle to anchor the FUN token price; then participants can obtain the TWAP price of FUN on the BSC DEX; finally, according to the gap above two price, participants can decide whether or not to proceed rebase and the exact ratio of rebase, so as to maintain the price of FUN pegged at 1/30 billion of total NFT encrypted assets.
For NFTFUN Protocol, the most importance is the rebase mechanism. All changes in the number of FUN Money supplied are equally applicable to the owner of each address, including wallets, CEX Exchange and DEX Exchanges.
Simply speaking:
Inflationary rebase → FUN Money in your wallet will be expanded;
Deflationary rebase → FUN Money in your wallet will be contracted;
Participants always held the same percentage of the total token supply.
2. Understanding the mechanism in a complex way
Changing the number of tokens circulating in the market through flexible incentives can be viewed as changing the relationship between supply and demand, so as to affect the price of FUN.
There will be three states in the market:
a. Inflation period — the price of FUN Money is soaring
Positive rebase adjusts by price difference/5.
E.g. if the price is $1.10 and the target price is $1.00, the rebase is +2%.
b. Deflation period — the price of FUN Money is falling
Negative rebase adjusts by price difference/2.
E.g. if the price is $0.90 and the target price is $1.00, the rebase is -5%.
c. Equilibrium period
The price of FUN Money remains within the range of plus or minus 5%, the token supply amount will not change.
As following, we will take inflation as an example to explain how FUN flexibly adjusts token supply (expansion or contraction) to achieve target price equilibrium.
In the t1 — O stage:
When the price of FUN Money is soaring, as shown in the t1-O stage(figure 1), when FUN price rises from $1 to $2, the number of token in this era is in expansion. FUN’s smart contract will obtain price information through the oracle, thereby airdropping FUN token to all holders to increase token total supply, as shown in the t1–0 stage of figure 2. While the number of FUN token continues to increase, the price will also increase. Correspondingly, FUN holders will start arbitrage after they perceive the increase in the supply of tokens at point O (the time when the Rebase mechanism occurs.
In the 0 — t2 stage:
At this stage, the wealth of holders will witness a rapid increase because of the holding expansion and soaring price, resulting in a fact that holder highly tend to sell FUN Money to make assets realization. With the amount of FUN selling showing a dramatic upward, the price of FUN Money will also fall from $2 to 1$ due to the counter-effect between market supply and goods price.
In the same way, when a deflation period occurs, FUN’s smart contract will contract those tokens of holders, thereby adjusting FUN Money to return to its target price equilibrium.
How can participants make profits from NFTFUN Protocol?
At current stage, we have two types of users. One is long-term holders, who are optimistic about the NFT index and make a comprehensive assets allocation.
The other type is speculators. Those participants generally buy FUN Money when the market cap is relatively low and expect to obtain more tokens when market change to inflation period so that carry our arbitrage opportunities. At the same time, holders’ LP can also be pledged on the Staking section to proceed FUN farming. In addition to receiving transaction fees, participants who provide higher liquidity for FUN can also receive extra rewards.
The authenticity, the provision of ownership and the transferability together create such high value of NFT field, and due to these three unique traits, NFTs can provide unlimited possibilities for the real world and virtual assets. We believe that, the NFT field is still in its infancy, and its market capitalization surely will have a bigger leap this year. Depending on this bullish market condition, we are also confident that the FUNMoney Protocol will show a rapid and impressive growth!!! Now, we are making efforts for the second phase development. Please keep attentions! Thanks.
More info：
website：https://nftfun.org
Telegram：https://t.me/NftFunProtocol
Twitter：https://twitter.com/NFTFunProtocol
Medium：https://medium.com/@NFTFunProtocol
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