Crypto glossary
Rebase token (elastic supply)
A rebase token automatically changes every holder's balance, expanding or contracting supply to chase a price target or to distribute yield to holders.
Instead of moving tokens between wallets, a rebase adjusts the total supply and every balance proportionally, so each holder keeps the same share of the network. Early experiments such as Ampleforth used rebases to steer the price toward a target: when it traded above, everyone received more tokens; when it traded below, balances shrank.
Today the most common use is distributing income. Lido's stETH rebases daily so that balances reflect staking rewards, and several yield-bearing stablecoins do the same with interest. Holders see their number of tokens rise without claiming anything, which is simple for users but requires every integration to handle changing balances.
Many DeFi contracts assume balances only change on transfer, so rebase tokens can break pools, bridges and lending markets, which is why wrapped non-rebasing versions such as wstETH exist. Price-target rebases do not create value: a holder's share stays the same while the market value can still fall. Tax treatment of each rebase may also be unclear.
Example
A holder with 10 stETH wakes up to find 10.001 stETH in her wallet after the daily rebase adds that day's staking rewards.