Rebasing Token
A rebasing token is a token whose balance in your wallet changes automatically, without any transfer, to reflect rewards earned or a deliberate adjustment of the total supply.
How rebasing works
In a normal token, your balance changes only when tokens are sent to or from your address. A rebasing token's smart contract can instead adjust every holder's balance at once, typically by changing an internal multiplier. Each holder keeps the same share of the total supply; only the number of units changes.
Rebases can happen on a schedule, such as daily, or whenever a condition is met. The direction depends on the design: some tokens only ever rebase upward, others can rebase down.
Two main uses
The first is distributing yield. Lido's stETH rebases so that staking rewards appear as a slowly growing balance, while one stETH tracks roughly one staked ETH. The second is supply-elastic tokens such as Ampleforth (AMPL), whose total supply expands or contracts in an attempt to push the price toward a target. There, a rebase does not by itself make holders richer or poorer, because everyone's share stays the same.
An example
Say you hold 100 units of a yield-bearing rebasing token. After a reward rebase of 0.01%, your wallet shows 100.01 units, though you made no transaction. With a supply-elastic token, a 5% downward rebase would turn 100 units into 95, and the price would need to rise for your holding's value to stay the same.
Practical pitfalls
Many DeFi protocols, bridges and exchanges are not built for balances that change by themselves. Rebasing tokens deposited into such contracts can lose their rewards or cause accounting errors, which is why wrapped, non-rebasing versions such as wstETH exist. Tax treatment of each small balance increase is unclear in some countries and may create many small taxable events.
Supply-elastic designs can also confuse holders: a rising number of tokens can look like profit even while the total value falls. Always look at the value of your position, not only the unit count.
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Frequently asked questions
Did someone send me tokens if my balance changes?
With a rebasing token, no. The contract adjusts all balances at once, so the change happens without any transfer to your address.
Is stETH a rebasing token?
Yes, stETH rebases to pass on staking rewards. Its wrapped version, wstETH, does not rebase and instead grows in value per token.
Are rebasing tokens risky?
They carry the risks of the underlying asset plus compatibility risk with protocols that do not handle changing balances correctly.
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