Elastic Supply
Up-Only Supply. Stable Price.
OTokens work differently than most tokens. Instead of the price increasing as the value of the assets under management increases (as with Compound cTokens or Yearn yTokens), the value of 1 OUSD remains constant at approximately $1. Similarly, the value of 1 OETH is worth approximately 1 ETH. The contracts constantly adjust the monetary supply to automatically update the balance in every token holder’s wallet to reflect the yield that has been earned by the protocol.
Think of it as interest accruing in your bank account. The unit of account and value for the US dollar doesn’t change. You just get more US dollars over time as you earn interest.
This mechanism was inspired by the novel approach taken by Ampleforth, but there are some key differences that are worth highlighting:
OUSD is 100% backed by other stablecoins and does not have the same challenge maintaining the peg to the dollar. Given the ease of minting and redeeming OUSD, we can count on arbitrageurs to ensure the peg is maintained. Similarly, OETH can be redeemed for an equal ETH amount of underlying collateral at any time.
OToken rebasing is up-only. The protocol will only increase the supply to match the realized gains earned by the underlying strategies. Your principal is protected as long as nothing goes wrong with the underlying strategies. Your balance will never decrease, but the value should drop if there's a failure in the underlying systems (eg. USDC depegs again)
Unlike Ampleforth, which only rebases once per day, the monetary supply of oTokens are constantly being updated in real-time as yield is generated. Rebases are triggered regularly as users interact with the OToken contracts. Chainlink Keepers ensure at least one rebase occurs every day.
Manually triggering a rebase
Anyone can trigger a rebase at any time by calling the rebase function on the OUSD vault or OETH vault. You can do this on Etherscan by connecting a web3 wallet.
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