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What is Rebase tokens?

Rebase tokens are type of cryptocurrency that have a changing circulating supply, either growing larger (more coins being created/minted) or decreasing (coins get destroyed or 'burnt'), usually to maintain a stable price or achieve a specific target price.

  1. Traditional tokens:

    • This have a fixed supply set at the creation of the token. The price of these tokens is determined purely by market demand and supply dynamics

  2. Rebase tokens:

    • This are type of crypto-currency. Also called as Elastic token.
    • have a changing circulating supply
    • either growing larger price (more coins being created/minted)
    • Or, decreasing price (coins get destroyed or 'burnt')
    • can increase or decrease their supply automatically!!!

How Do Rebase Tokens Work?

  1. Target Price & Supply Adjustment:

    • designed to maintain a target price (e.g., $1 per token).
    • If the price goes above the target, the supply increases (minting).
    • If the price drops below the target, the supply decreases (burning).

  2. Rebasing Mechanism:

    • At fixed time interval, protocol will check the token price
    • Contract automatically adjusts the total supply of the token depending on the token market price!!!
    • If a rebase reduces supply -> Users balance decreases
    • If a rebase increases supply -> Users balance increases
    • but their share of the total supply remains the same

  3. Positive Rebasing:

    • When the price of token is high relative to its target (say, $1.00)
    • the protocol automatically increases the supply, distributing more token to all holders proportionally!!!
    • which theoretically should lower the price

  4. Negative Rebasing:

    • if the price of token falls below the dollar mark($1)
    • Protocol reducing the number of tokens in each holder's wallet
    • attempting to increase the price per token

Example rebase tokens:

  • Ampleforth (AMPL)
  • Yam Finance (YAM)
  • Base Protocol (BASE)
  • Olympus DAO (OHM)

What is Blockchain Bridging?

  • A protocol that enables the transfer of tokens/NFTs and information between different blockchain networks.
  • A blockchain bridge allows assets, data, or smart contract instructions to move between different blockchain networks.
  • Bridging enables DApps and DeFi protocol work on different blockchain network.

Example:

  • You have ETH on Ethereum but want to use it on Polygon.
  • A bridge helps you move ETH from Ethereum to Polygon by locking ETH on one chain and minting wrapped ETH on the other.

The main concept we can consider in bridging is:

  • Locking-up assets on source chain using contract and then minting their wrapped version on destination chain!!!

Transfering data or tokens are done with contract:

  • Source chain and Destination Chain contracts

Different Bridging mechanism

  1. Burn and Mint bridging:

    • Tokens are burned on the source blockchain
    • an equivalent amount of tokens are minted on the destination blockchain.
    • total supply of token remain constant

  2. Lock and Mint Bridging:

    • tokens are locked on the source/issuing blockchain
    • And, wrapped version of this tokens is minted in destination chain!!!
    • This wrapped version can be transferred across other non-issuing blockchains using the Burn and Mint mechanism.

  3. Burn and Unlock Bridging:

    • Tokens are burned on the source blockchain (which is the non-issuing blockchain)
    • an equivalent amount of tokens are released on the destination blockchain
    • applies when you send tokens back to their issuing source blockchain

  4. Lock and Unlock Bridging:

    • Tokens are locked on the source blockchain
    • an equivalent amount of tokens are released on the destination blockchain
    • This method is not recommended because, it can result in fragmented liquidity

Cross Chain Token(CCT) Standard (defines flow of contract)

  • A Cross-Chain Token Standard is a set of rules that ensures tokens can move between different blockchains safely and efficiently by leveraging the chainlink CCIP for security
  • Cross-chain token standards are just set of rules and instructions that should be followed during transferring tokens cross chain.

Example: A stablecoin that seamlessly moves between Ethereum and Polygon.

  • Ensures all tokens moving across chains follow the same secure protocol.
  • CCT standard provides different mechanism for transferring tokens like burn/mint, lock/unlock

Cross Chain Interoperability Protocol (CCIP)

  • Chainlink CCIP is a system/process that allows smart contracts to transfer data/assets/tokens cross-chain
  • CCIP is the bridge that connects separate blockchains, allowing them to exchange information securely and efficiently.
  • It uses defense-in-depth security for transfering data/assets cross chain
  • CCIP uses Decentralized Oracle network(DON) and Risk management network(RMN) to check security and transparency for transfering data
  • CCIP also inclide rate limits for transferring data/assets for security.

Note: CCIP is performing blockchain bridging in more secure and efficient way as compare to traditional blockchain bridging!!!

Why Do We Need Chainlink CCIP?

  • Ethereum, Binance Smart Chain, and Solana cannot directly exchange tokens or data.
  • Traditional blockchain bridges are more centralized and need trust on third parties.
  • Smart contracts are locked to their chain and cannot access data from other chains.

CCIP solves this by providing a universal, decentralized, and secure way for blockchains to interact with each other

Chainlink CCIP core capabilities

  1. Arbitrary Messaging

    • is the ability to send arbitrary data (encoded as bytes) to a receiving smart contract on a different blockchain.
    • Send msg from one contract on one chain to other contract on diff chain

  2. Token Transfer:

    • You can transfer tokens to a smart contract or directly to an metamask wallet(EOA) on a different blockchain.

  3. Programmable Token Transfer:

    • simultaneously transfer tokens and arbitrary data (encoded as bytes) within a single transaction
    • Data can be instructions on what to do with those tokens.

Transferring/Bridging tokens cross-chain using CCIP

  • CCIP will specifically look for bridging tokens cross-chain
  • We will bridge rebase token from eth-sepolia to base-sepolia
  • will follow the below flow for bridging:

  1. Deploy Rebase Tokens:

    • RebaseToken Contract is ERC20 compatible contract
    • Deploy rebase token on eth-sepolia and base-sepolia
    • Contains mint,burn,grantMintAndBurnRole function

  2. Deploying Token Pools:

    • Deploy RebaseTokenPool contract on both eth-sepolia and base-sepolia chain
    • These pools are essential for minting and burning tokens during cross-chain bridging.
    • Each token will be linked to a pool, which will manage token transfers
    • Contains lockOrBurn and UnlockOrMint function

  3. Deploy Vault contract:

    • Deploy vault contract
    • Contains depositCollateral,redeemCollateral functions

  4. Claiming Mint and Burn Roles:

    • Grant mint and burn role to Vault and Pool contract

  5. Claiming and Accepting the Admin Role:

    • registerAdminViaOwner function to register our EOA as the token admin and register our token on CCIP
    • acceptAdminRole function to complete the registration process.

  6. Linking Tokens to Pools:

    • setPool function to associate each token with its respective token pool.

  7. Configuring Token Pools:

    • applyChainUpdates function on your token pools to configure each pool by setting cross-chain transfer parameters to enable chain

  8. Deploy token on vault:

    • On Vault contract -> call depositCollateral to borrow rebase token
    • This will be done before bridging.
    • We will bridge the rebase token from eth-sepolia to base-sepolia

  9. Transferring/Bridging Tokens:

    • Will use EVM2AnyMessage(), getFee(), ccipSend() function to bridge token cross-chain
    • CCIP will take care of bridging token

SUMMARY for CCIP

  • CCIP is basically performing blockchain bridging in more secure,decentralized and transparent way!!!
  • It works on DON and RMN which relay and validate cross-chain messages.
  • It enables token transfers, smart contract interactions, and seamless multi-chain applications.
  • It's more secure than traditional bridges
  • CCIP is like an advanced version of blockchain bridges, but built for security, scalability, and true interoperability!!!

forge install smartcontractkit/ccip@v2.17.0-ccip1.5.16

Pool contract

  • These pool contract are essential for minting and burning tokens during cross-chain transfers.
  • Each token will be linked to a pool ,which will manage token transfers and ensure proper handling of assets across chains.
  • Pool contract will be granted access for minting and burning during cross-chain transfers.
  • Will follow burnAndMint mechanism where
    • burn tokens -> source chain
    • mint token -> destination chain