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The Base Protocol is powered by a yet to become stable synthetic currency — a stable peg to total crypto market cap. The BASE synthetic asset has an elastic supply.
It is best if we look into the mechanism that drives the protocol.
BASE derives its target price (tp) directly from the total market crypto cap (cmc) at a rate of 1 : 1 trillion, or cmc x 0.1 on 12 :
tp = cmc x 0.1 on 12
If cmc = $500,000,000,000
Then tp = 500,000,000,000 x 0.1 on 12
Target price is $0.50.
Initial listing price is set at $0,4 but it could change if the cmc grows drastically. It won’t decrease in any way before the listing.
The Base Protocol will use an elastic supply protocol which has an algorithm that wants to reach an equilibrium between BASE market price and BASE target price. When the token price rises the rebasing mechanism comes into action.
The BASE token price is not limited to the cmc and the target price. Price can go up to 1$ for example when the rebase mechanism comes to action which pushes the price back down to equilibrium between base market price and a target price that is pegged to cmc.
In its early stages, the BASE is a speculative asset that seeks to peg to cmc. In its final state, the BASE is a synthetic asset that is stably pegged to cmc.
When the rebase event occurs, the total supply of BASE is adjusted in proportion to the difference between market price and target price. By adjusting supply there is no difference in the net value of the holders of BASE tokens. If the price goes down, the number of tokens increases.
OK, but when does the positive rebase end? At which price does it change to negative rebase and when does the negative one stop? Is there any time frame for the positive rebase to end as with Ampleforth. There is so much unknown at the time of writing.
More info about the Base Protocol and its mechanism is available in the litepaper and the whitepaper.
The cmc will be determined with the integration of Chainlink data feed.
Tokens will list on Uniswap and possibly some other DEXs with CEX listings following in Q1 2021. There is a plan for the same period to work on a BASE brokerage site where anyone can buy BASE for fiat. Marketing campaigns will start next year as well. The roadmap can be found here.
The team is quite young, all coming from Houston and all finished their studies at the University of Houston in the period from 2014 to 2017. Both co-founders Nick Ravanbakhsh and Dylan Senter are entrepreneurs who, among few other startups, co-founded a media production company Spectiv in 2016. They founded Base in August 2020. Another team member is a developer Chris Peña, who is also coming to Base from Spectiv. The fourth musketeer is Based McGee. He is a an experienced full-stack developer and DevOps engineer who will design the Base Protocol’s infrastructure, security, and decentralized application user experience. Working in the field for 10 years. There is more to read about the team in the article published on Base official Medium blog.
Some information about the fundraising and token metrics
Token distribution:
*9,3% team
*4,2% advisors
*21,8% ecosystem
*4,6% cascade rewards (staking)
*5,8% initial liquidity
*52,2% strategic sales
*1,7% community lottery
There is a really big allocation for investors. More than half of the token supply. That would make a $1,7M value considering the listing token price of $0,40.
The Base Protocol is transparent about its fundraising details. All the info is available here.
The bad side of the BASE token distribution design is that all the funding rounds have some tokens unlocked. Seed included. But this is now a common standard nowadays. The seed doesn’t have such price advantage and also longer vesting over 12 months with only 8,3% tokens unlocked. But the seed raised only $60k and have 3,6% allocation with $0,20 token price.
Other following 3 private rounds raised about $1,3M together and have token prices within the price range of $0,3 and $0,33 which are not that different compared to each other. Vestiges and unlocked token percentages differ slightly. But not much. There will be a bit of selling pressure and the market will be saturated with tokens as all the private sale tokens and some seed get unlocked within 4 months since TGE.
Community lottery round will be done on the 18th November and the pricing will be set at $0,4.
Base Protocol is incubated by the DuckDAO. Opinions on that are subjective.
TOTAL MARKET CAP: 8,38M BASE
UNDILUTED MARKET CAP: $3,35M
INITIAL CIRCULATING SUPPLY: 1,75M BASE
INITIAL MARKET CAP: $700k
With such a rebasing mechanism and elastic supply protocol, there are certain arbitrage opportunities. Especially in protocol’s early stages when the BASE token is a speculative asset that seeks to peg to cmc. In its final state, the BASE will be a synthetic asset that is stably pegged to cmc. But no way to tell when this will happen. There is no price stability at this stage. The rebase parameters and mechanism is not known and/or not existent.
Nick Ravanbakhsh: “BASE doesn’t have any mechanisms to specifically mitigate negative rebases. The main mechanism which incentivizes “hodling under the peg” is the BASE Cascade, which offers rewards to liquidity providers. The rewards pool of the BASE Cascade increases at every rebase, including negative rebases, which incentivizes users to stay staked in these periods.”
The negative rebase is based on assumption that hodler will be attracted by the rewards for providing liquidity of the token which price is droping as well as speculative arbitrage opportunities. This is quite dangerous game.
The token distribution is very high on the startegic investor’s side. They own the majority of tokens with 52,2%. The public sale token allocation is only 1,7%. This is not a healthy token distribution architecture. And most of those strategic investor’s tokens will be liquid within the first 3–4 months after initial exchange listing. The market will be saturated with BASE tokens and the selling pressure will be high.
The protocol might sound somewhat similar to Ampleforth, just targeting a different price index, which is an arbitrary difference. But Ample has its rebase mechanism elaborated with the $ price index while Base is based on an assumption that negative rebase will be powered by the users incentivisation. If that does not happen the price might keep falling and the rebase stays negative. The cmc index does not really matter at all, could have also been any other price index chosen. No actual value for choosing it.
