Bonding Curve

A bonding curve uses a mathematical formula to define the price of a token based on its supply. Rising supply results in an increasing token price while declining supply results in a decreasing token price.

When new users want to acquire a token with a bonding curve they need to mint new tokens increasing the supply and the price. Conversely when users want to sell the token they burn it decreasing the supply and price

In a basic bonding curve the relationship between price and supply is linear.

Each additional token minted is a $1 more than the last one. So the first token is a $1, the second is $2, etc…

Bonding curves can be created using any positively increasing function though. Different curve types can be leveraged to incentivize behaviors token projects want investors to adopt.

S-Curve

S-curves disproportionately reward early adopters before reaching an inflection point that sharply increases the price before tapering off as the exponential growth phase completes itself.

Quadratic

Quadratic curves increase at a exponential rate instead of a linear one.

So the first token is still a $1 and the second token is still $2 but, the third token is $4 instead of $3 and the fourth token is $8 instead of $4 etc…

Further Reading Bonding Curves

Tokens 2.0: Curved Token Bonding in Curation Markets