Market-Driven Token Issuance

While most tokens today operate on a fixed supply and predetermined emissions schedule, bTokens use a dynamic issuance model. By not relying on a fixed supply, bTokens remain flexible and adaptive to their surrounding market conditions. In Baseline, token supply is a function of liquidity, not the other way around.

When buyers deplete the supply of tokens on the market, Baseline will mint new bTokens directly into the liquidity pool to replenish any missing inventory. As these tokens are sold back, the protocol will burn any of the tokens collected in its liquidity positions. As a result, bTokens do not have a fixed supply cap; they grow and shrink in response to market demand.

Due to Baseline's market making, bTokens are more naturally resilient to common market manipulation. Tactics such as cornering the supply ("bundling"), spoofing volume, and pushing price in a specific direction now require significantly higher capital expenditure than for traditional tokens. As a result, bToken markets are more authentic and reliable than what you traditionally see on token screeners and centralized exchanges.

The Solvency Invariant

Since bTokens cannot be minted externally, the protocol knows the circulating supply at any given time.

To ensure that the liquidity structure remains solvent across rebalances, Baseline uses the invariant Capacity > Circulating Supply. The invariant checks to make sure the liquidity in the pool can buy back all of the tokens in circulation.

• Capacity is calculated as the total amount of bTokens purchasable across all of the protocol-owned liquidity positions.
• Circulating Supply represents the total amount of bTokens purchased from the liquidity pool.

The invariant is simple: check that the current configuration of the protocol's liquidity positions can buy back more than all of the tokens circulation. While basic, this single check is what keeps the Baseline system secure despite constant changes in liquidity positions and circulating supply.