What is DIGG

An elastic supply token pegged to the price of Bitcoin and governed by the Badger DAO.

Read more here: https://badger.finance/digg

What is Elastic Supply?

For most assets as supply and demand change the price is driven by normal market forces. The supply is a fixed input (that can be changed for different reasons) but is generally held stead y and increase or decrease in demand manifests in a decrease or increase in price. Elastic supply tokens (AMPL, YAM, BASED, ESD) are an experiment in chenging this relationship and dynamically adjusting the supply as the price changes relative to a target.

For example:

Assume Elon Musk decided that the price of Tesla should always be $420. The demand for the stock would still waver up and down with expectations on success or failure of the company so how would he enforce this when its a free market?

As the price shifts above 420 more stock could be issued to all current holders. Everyone retains the same % of the total supply but for those looking to purchase the stock there is now more available to purchase. With demand being driven by external forces (and therefore static at any given point in time), an increase in supply should drive the prices down.

The inverse also applies for when the price is below $420, everyones balance can be reduced, reducing total supply and ideally driving the price upward since there is less available for those on the demand side to purchase.

What is rebasing?

Rebasing is the mechanism that adjusts the supply of an elastic supply asset to promote price stability

There are generally the same parameters

  1. Target price (this is taken from an oracle, badger has a custom oracle, looking into other solutions)
  2. Current price (also taken from an oracle, likely referencing the most liquid dex pools)
  3. Rebase Delay (minimum amount of time that has to have passed for a rebase to be called)
  4. Rebase multiplier (What % of current supply should be minted/burned relative to different in current and target price. Hoe many cycles is it targeting to take to reach the intended price?)