🔄Elastic Supply: Dynamic Rebasing Explained

LumeFi employs an advanced Elastic Supply (Rebasing) mechanism designed to automatically maintain the stability of the LUME token peg to CRO. This innovative approach ensures that token supply dynamically adjusts in response to market conditions, protecting holders from extreme volatility.

⚙️ How the Rebase Mechanism Works:

At every epoch, the protocol evaluates the Time-Weighted Average Price (TWAP) of LUME relative to CRO and adjusts the total token supply based on predefined price thresholds:

• When TWAP > 1.08 CRO (Above Target Range):

  • The protocol gradually increases total token supply to reduce upward price pressure.

  • The increase is capped at 1% per epoch, scaling proportionally back toward the target price (1.08 CRO).

  • Example: If TWAP = 1.085 CRO (0.005 above threshold), supply increases approximately 0.5% that epoch.

• When TWAP < 0.96 CRO (Below Target Range):

  • The protocol decreases total token supply to alleviate downward price pressure.

  • The decrease is capped at 2% per epoch, scaling proportionally upward toward the target price (0.96 CRO).

  • Example: If TWAP = 0.945 CRO (0.015 below threshold), supply decreases approximately 1.5% that epoch.

• When TWAP remains within the target range (0.96–1.08 CRO):

  • No rebase action occurs, maintaining supply stability within optimal pricing conditions.

📌 Benefits of Elastic Rebasing:

• Automatic Stability: Keeps LUME aligned closely to the CRO peg, providing predictable token valuation.

• Reduced Volatility: Mitigates large swings in price, creating a safer environment for users and liquidity providers.

• Transparent Adjustments: Clearly defined rules provide predictability and confidence for community participants.

This elastic supply approach offers a responsive, automated, and transparent solution to peg maintenance, setting LumeFi apart from protocols relying solely on manual interventions or outdated bonding mechanisms.