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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.

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What is a Bonding Curve?

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Basic Concept

A bonding curve is a mathematical formula that:

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

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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

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TokenFabric Curve Types

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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

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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

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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

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Choosing Your Curve

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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

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Use Case Examples

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Curve Parameters

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Key Settings

1. Initial Price
   • Starting point
   • Entry barrier
   • Market positioning
   • Growth potential
2. Curve Steepness
   • Price sensitivity
   • Growth rate
   • Market dynamics
   • Risk level

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Parameter Impact

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Linear Curve

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

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Exponential Curve

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

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Logarithmic Curve

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

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Best Practices

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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

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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

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Advanced Topics

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Price Impact

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

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Liquidity Management

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

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Next Steps

Continue your learning:

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

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Quick Reference

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Curve Selection Checklist

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