Single asset vaults usually choose from 2 types of tokens that represent user shares.
- Tokens pegged 1:1 to underlying assets employing the rebase architecture. When underlying asset volume grows then the supply of such tokens is increased to hold 1:1 peg. Examples: AAVE's aTokens, Overnight's USD+;
- Constant supply tokens representing user's share of a vault. When underlying asset volume grows then the token supply remains the same but the peg of the token to the underlying assets naturally increases. Examples: Compound's cToken.
What are the pros and the cons of the elastic supply tokens?
From the usability standpoint:
- When a rebase token is provided to liquidity pools do additional difficulties emerge for the pool to preserve the interest for the user?
- When an exact amount of a rebase token is sent to a recipient does the one get this precise amount? Actually behind the scene what is transferred is the principal – does rounding errors appear?
- Also an additional interest gets accrued after the transfer which could bring difficulties to the accounting. Is there any bad experience around accounting on a rebase token?
From the engineering standpoint:
- The rebase architecture brings additional complexity. What are gas spendings implications?
- Are there any limitations on such architecture? What functionality is impossible to be implemented for a rebase token?