Elastic Supply Protocol

An elastic supply protocol is a system designed to adjust its circulating supply dynamically to stabilize the price of its native token. Unlike fixed-supply assets like Bitcoin, these protocols aim to provide a stable unit of account.

The elasticity is achieved through algorithmic rebase events that respond to market demand. These systems function as decentralized central banks, managing the supply to match the demand for the asset.

The primary challenge is maintaining trust and adoption while the supply constantly shifts. These protocols often incorporate governance models to allow token holders to influence the supply adjustment parameters.

They represent a unique intersection of monetary theory and smart contract automation.