BASE Uniswap LP Update
The First BASE Rebase
On December 2nd at 4:00PM CST, the first BASE rebase occurred. At that moment, BASE price was $1.36 with a target price of $0.58. This target price is based on the peg to crypto market cap, which was $580B at the time. To leash BASE price down to $0.58, a supply expansion of 136% was triggered.
At this time, BASE supply grew from 8,795,645 to 20,808,463 — a total delta of 12,012,818 in new BASE supply. The rebase executed exactly as it is programmed to with no errors or variance. See Etherscan.
This rebase should have led to a price drop from $1.36 to $0.58, in accordance with the increased BASE : ETH ratio in the Uniswap liquidity pool. However, when the rebase triggered, price actually dropped to below $0.30, then swiftly recovered back above the $0.58 peg. As this article is written, BASE is currently priced above $0.70 and positioned for another expansion rebase.
This “flash crash” has confused a lot of people in the community, and at first, confused us a bit too. In partnership with the AmpleSense DAO and Halborn, we’ve identified what happened and have resolved the underlying issue.
Demystifying the “Flash Crash”
The rebase delta that affected total supply was 12,012,818. The rebase delta that should have affected the BASE Uniswap liquidity pool was 931,027.
However, through a compromise in Uniswap’s LP protocol, those 931,027 tokens were siphoned from the pool and swapped.
This was not a “hack” nor a vulnerability in the BASE token contract. Rather, it was an exploit on the Uniswap liquidity pool that could only happen to a rebase token.
Fortunately, there is a simply fix that ensures it doesn’t happen again:
We have amended the BASE contract’s rebase() method to call through to the UNI-WETH-BASE-V2 token’s sync() method after it adjusts its own supply. Because this call to sync() occurs in the same transaction as the supply adjustment, it is executed atomically, meaning that there is never a time during which Uniswap’s accounting does not match BASE’s actual supply.
The BASE Uniswap liquidity pool is no longer vulnerable to flash crash events like this one. This was demonstrated through today’s successful rebase.
Accounting for Siphon
All 931,027 staked BASE that should have affected the liquidity pool are accounted for (including rebases), and will be allocated to all users who were staked in the Cascade at the time of the rebase.
These tokens are coming from the BASE Ecosystem Reserve and will be issued in the next few days. This reserve is allocated for future initiatives and to support the community in situations like this one.
The net result is that no user’s rebases were affected by this event.
The BASE token contract is audited/secure, and Uniswap is one of the most heavily audited platforms in the entire Ethereum ecosystem. Even in a perfect testing environment, there was no way to anticipate this issue with the Uniswap liquidity pool. This occurrence wasn’t ideal, but was an inevitable mainnet “R&D” cost. There are other LP platforms that don’t face this issue.
For Uniswap, we’ve just had to amend the code. This is no inconvenience, but we suggest and look forward to a patch on this issue for the Uniswap V3 update. As far as BASE is concerned, it is completely resolved. It would be great for the future ecosystem of elastic supply tokens to have this smoothed out on the Uniswap side.
12/3 Bonus Rebase
Today’s rebase demonstrates that the Uniswap liquidity pool issue has been completely settled. And as we’re sure you guys have noticed, a second, bonus rebase was triggered. This was a gesture to reward early BASE holders who have joined us on this journey.
Rome Wasn’t Built in a Day
Creating innovative, unprecedent products implementing new blockchain technologies rarely happens without a hitch. But as it stands now, we’ve reached a point where the BASE token contract functions as intended, the Uniswap liquidity pool is secure, and the Cascade is tracking LP rewards as intended.
Over the next week, we’ll be focused on the Cascade — debugging some display issues, optimizing user experience and ensuring that deposited BASE and BASE rewards are properly accounted for. Don’t worry, blockchains make this simple.
Thank you all for joining us on this journey — and BASE up! 🚀
