The Base Protocol (BASE) is a synthetic crypto asset that derives its price from the total market cap of all cryptocurrencies (cmc) at a ratio of 1 : 1 trillion. BASE exists to maintain a market rate that is stably pegged to its underlying asset — the crypto industry. BASE’s peg to cmc is held stable through an elastic supply protocol.
The Base Protocol acts as a one-stop trading instrument which allows holders to speculate on all cryptocurrencies simultaneously, rather than just one or a select portfolio of multiple. It allows traders to agnostically invest in the entire crypto ecosystem. This is its primary function.
The Base Protocol can also be used as a tool for more nuanced trading situations:
BASE can be used as a transitory, “save haven” position between crypto transactions. Typically, one might trade into a “blue chip” crypto to reduce risk exposure, or trade into a stablecoin to remove risk exposure. Trading into BASE presents an alternative that maintains exposure to all cryptocurrencies rather than just one. This could be riskier than trading into a blue chip, but in some instances, may act as a hedge against some isolated / unforeseen events. For example, a rapid downfall in the blue chip, or the rapid emergence of a new project. Trading into BASE mitigates the inherent risk of holding one coin, while absorbing the potential gains of several others. So far, the most popular safe haven crypto asset is Bitcoin, as it generally leads industry direction and is historically the least volatile. The ability to “hold” the entire crypto market should present a useful trading alternative.
Another use case is for BASE to function as a price reference for all cryptocurrencies. If a trader is speculating on an altcoin (x), he will often track price in terms of x/BTC rather than x/USD. This price reference illustrates how x performs relative to BTC rather than USD, which is the more important data for many crypto traders. If the trader instead uses x/BASE as their price reference, it would illustrate how x performs relative to the overall crypto market, rather than just BTC. The x/BASE price reference should present a valuable alternative to the popular x/BTC price reference.
But to be a market index, Base must have a feature that gives it the fexibility to digest market changes, and that feature is called the Rebase.