// GLOSSARY -- DEFI

What is Bonding Curve?

1 min read Updated

A bonding curve is a mathematical function that determines a token's price based on its supply — automatically increasing price as more tokens are minted and decreasing as tokens are burned.

WHY IT MATTERS

Bonding curves create programmable price discovery. Instead of a market setting the price through supply and demand of existing tokens, a bonding curve sets the price mathematically as new tokens are minted. Buy tokens → supply increases → price rises along the curve.

The curve shape determines behavior: linear curves have constant price increase per token, exponential curves accelerate price growth, and sigmoid curves have S-shaped adoption dynamics.

Applications include continuous token offering (fundraising without traditional sales), curation markets (staking on content quality), and pump.fun-style token launches (bonding curve bootstrapping before DEX migration).

FREQUENTLY ASKED QUESTIONS

How is a bonding curve different from an AMM?
AMMs set prices based on ratios between two existing tokens. Bonding curves set prices based on the supply of a single token — minting and burning against a reserve asset.
Can bonding curves be gamed?
Early buyers get favorable prices and benefit from later demand — this is by design. But it also creates front-running incentives and potential for manipulation by early actors.
Where are bonding curves used?
Token launches (pump.fun), curation markets, continuous fundraising, and some NFT pricing models. They're elegant for bootstrapping liquidity but create specific risk profiles.

FURTHER READING

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