Understanding Bonding Curves

Learn about automated market makers and price mechanisms on TokenFabric

Understanding Bonding Curves

Bonding curves are automated market makers that determine token prices based on supply and demand. TokenFabric offers several curve types to suit different project needs.

What is a Bonding Curve?

Basic Concept

A bonding curve is a mathematical formula that:

• Automatically sets token prices
• Manages buy/sell operations
• Creates predictable pricing
• Ensures constant liquidity

How It Works

1. Price Calculation

   • Based on current supply
   • Adjusts automatically
   • Transparent mechanism
   • Continuous liquidity

2. Key Benefits

   • Always liquid
   • Predictable pricing
   • No order books
   • Instant trades

TokenFabric Curve Types

1. Linear Curve

$$Price = m Supply + b$$

Best for:

• Steady growth
• Predictable pricing
• Simple tokenomics
• New projects

Characteristics:

• Constant price increase
• Easy to understand
• Lower volatility
• Stable growth

2. Exponential Curve

$$Price = a e^(bSupply)$$

Best for:

• Scarcity-driven tokens
• Reward systems
• Collector items
• High-growth projects

Characteristics:

• Accelerating price growth
• Early adopter benefits
• Higher potential returns
• More volatility

3. Logarithmic Curve

$$Price = a ln(Supply + 1) + b$$

Best for:

• Utility tokens
• Large supply tokens
• Stable projects
• Community currencies

Characteristics:

• Diminishing price growth
• More stable long-term
• Controlled appreciation
• Lower volatility

Choose your curve type carefully - it cannot be changed after token creation.

Choosing Your Curve

Factors to Consider

1. Project Goals

   • Growth expectations
   • Target audience
   • Token utility
   • Market strategy

2. Economic Model

   • Supply dynamics
   • Price targets
   • Distribution plan
   • Investment timeline

Use Case Examples

Community Token

Recommended: Linear or Logarithmic

• Stable growth
• Fair distribution
• Predictable pricing
• Community friendly

Collector Items

Recommended: Exponential

• Scarcity value
• Early adoption rewards
• Price appreciation
• Exclusivity

Utility Token

Recommended: Logarithmic

• Controlled growth
• Sustainable pricing
• Wide accessibility
• Long-term stability

Curve Parameters

Key Settings

1. Initial Price

   • Starting point
   • Entry barrier
   • Market positioning
   • Growth potential

2. Curve Steepness

   • Price sensitivity
   • Growth rate
   • Market dynamics
   • Risk level

Parameter Impact

Linear Curve

• Slope affects price growth rate
• Higher slope = faster price increase
• Lower slope = more stable pricing
• Consider market size

Exponential Curve

• Base affects growth acceleration
• Higher base = steeper growth
• Lower base = gentler curve
• Plan carefully

Logarithmic Curve

• Coefficient affects curve shape
• Higher = more initial growth
• Lower = more gradual growth
• Balance accessibility

Best Practices

Testing Strategy

1. Parameter Testing

   • Use test transactions
   • Simulate scenarios
   • Check price impacts
   • Verify mechanics

2. Market Analysis

   • Study similar projects
   • Analyze market size
   • Consider competition
   • Project growth

Risk Management

1. Price Protection

   • Set appropriate limits
   • Plan for volatility
   • Monitor activity
   • Adjust parameters

2. Supply Control

   • Manage initial distribution
   • Plan token releases
   • Consider burning
   • Monitor circulation

Advanced Topics

Price Impact

• Understanding slippage
• Large order effects
• Market depth
• Trading strategies

Liquidity Management

• Reserve ratios
• Pool balancing
• Emergency measures
• Market making

Next Steps

Continue your learning:

1. Explore token metrics →
2. Learn about marketing →
3. Start creating →

Ready to Configure?

Create your token with the perfect curve on TokenFabric →

Quick Reference

Curve Selection Checklist

• Define project goals
• Analyze target market
• Choose curve type
• Set parameters
• Test thoroughly
• Plan monitoring
• Prepare launch

Start with conservative parameters - you can always adjust your strategy in future tokens.