In the stock market, there is a term called the "S&P 500," which is a stock index tracking 500 listed companies in the U.S. The goal of Base is to become the S&P 500 of the crypto world, serving as a benchmark for the industry. Base aims to track the total market capitalization of all cryptocurrencies.

The Base Protocol (BASE) is a token whose price is pegged to the total market capitalization of all cryptocurrencies. Base Protocol seeks to create the world's first tokenized crypto industry tracker. By linking Base to the total market cap of all cryptocurrencies, traders can speculate on the entire crypto industry through Base and use it as a benchmark for trading.

Previously, in the blockchain world, Bitcoin was considered the market index, earning it the playful nickname "the big cake" among insiders. Now, Base can also be said to represent the price trend of the total market cap, effectively acting as the so-called market index.

The Algorithmic Charm of BASE

Algorithmic stablecoins typically use a Rebase mechanism, and Base also employs the same Rebase mechanism as AMPL. The key difference is that Base is anchored to the entire crypto industry's market cap. The relationship between Base's price and the total market cap of all cryptocurrencies is 1:1 trillion. The price of Base is calculated as tp (Base's target price) = cmc (total market cap of all cryptocurrencies) × 0.1¹². In other words, if the crypto market cap is $450 billion, Base's price would be $0.45; if the market cap is $800 billion, Base's price would be $0.80.

What happens when Base's market trading price deviates from its target price?

The Base Protocol achieves equilibrium through an elastic supply mechanism, adjusting supply via inflation or deflation to reach the target price. Its primary function is to ensure that the market price (mp) equals the target price (tp).

That is:

When the market price equals the target price, Base is in equilibrium, fully reflecting the total market cap of all cryptocurrencies. When the market price does not equal the target price, Base is in a disrupted state, and the price does not fully reflect the total market cap. In this case, the Rebase mechanism is used to adjust the circulating supply, bringing the market price closer to the target price.

A Wilder AMPL—BASE

Many refer to Base as "a wilder AMPL," arguably a bolder "social experiment" following AMPL.

Base essentially tracks changes in the total market cap of all cryptocurrencies in a seemingly abstract way, but with the addition of a Rebase mechanism to make it appear profitable—essentially enabling arbitrage. Users engage in arbitrage, while the project builds consensus. Under this unique setup, once mass FOMO (fear of missing out) takes hold, the token's rapid price fluctuations will occur frequently.

When Base first launched, its daily trading volume reached $50 million. After surging tenfold in just two days, it quickly entered a "death spiral." On the morning of December 7, BASE experienced a -50% deflation.

AMPL saw a cliff-like drop only after a month of explosive growth, while Base deflated in just two days, proving it to be even wilder than AMPL. Dovey Wan, founding partner of Primitive Ventures, remarked that Base "completed in three days what AMPL did in three months."

Despite its rapid descent into a "death spiral" within days, Base can be considered a stable and innovative project when benchmarked against the total market cap of the crypto market. Built on the Rebase mechanism, it offers a refreshing concept.

Regardless of where Base heads in the future, what we can see now is that Base, under the Rebase mechanism, holds significant potential. The Rebase mechanism is evolving with more types of integrations and innovations, and the overall trend is moving in a positive direction.