One startup aims to solve the problems with rebase tokens
Rebase tokens are a type of cryptocurrency that adjusts their circulating supply in response to price fluctuation. This can be done via burning or minting tokens via the network to ensure price stability without affecting the value of a user’s holdings.
These tokens exist as a way to avoid crypto price volatility while still offering the benefits of cryptocurrencies, such as decentralization and global use. However, they have several key failings.
For one, rebase tokens require active expansion of the protocol's treasury in order to remain profitable. This causes some protocols to pursue irresponsible lending models, which, while profitable, incite cascading liquidations when losses compound on market moves to the downside. This is terribly unfortunate for not only the vast majority of investors but for the teams left running projects during times of poor market sentiment.
Many of these projects, built on the rebase token philosophy, exist as Fantom-powered Olympus DAO (OHM) forks (here, fork means “to copy”). However, as the failings of this philosophy continue to appear, some believe OHM forks are dying off. One startup, FantOHM DAO, claims the opposite and aims to fix the problems associated with rebase tokens in their current state.
FantOHM is a decentralized reserve currency protocol based on the Fantom FTM token, with the FantOHM alternative called FHM. Essentially, every FHM token is backed by tokens within the FantOHM treasury, meaning that FantOHM provided assets have an intrinsic value to be based on.
However, FantOHM assets aren’t tied to the exact value of the FHM token and can appreciate or depreciate algorithmically, just like a typical rebase token. Ideally, this means FHM would be able to exist and hold its
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