What is bonding curve?

A formula written into a contract that sets a token's price as a function of how many units exist, so buying mints new supply at a rising price and selling burns supply at a falling one.

It creates a market with no order book and no counterparty, which is why launchpads and fee-token designs use it. The curve is fully known in advance, so anyone can compute what the next purchase costs.

Early buyers get lower prices by construction. That is a design property rather than a fairness claim, and it is the single most important thing to understand before buying into one.

How it works

The contract holds reserve assets and mints tokens on demand. A price function maps current supply to a price per unit, so the cost of a purchase is the area under that curve between the current supply and the supply after your buy.

Because price depends only on supply, there is no need for anyone to be selling. The contract is always willing to mint at the formula's price and, in most designs, always willing to buy back and burn at it.

Common shapes are linear, where price rises steadily with supply, and exponential, where it accelerates. Steeper curves reward early buyers more and make later entry sharply more expensive.

Many launchpad designs add a graduation step. Once the curve raises a target amount, the accumulated reserve is deposited into a conventional liquidity pool and the curve stops minting, after which the token trades as an ordinary automated market maker pair.

Some designs use separate buy and sell curves, taking a spread in between as a fee. Some route a cut of every mint to a treasury. Both are in the contract and both are checkable before you transact.

Example

Illustrative linear curve where price in USDC equals supply divided by 1,000,000. At a supply of 1,000,000 tokens the price is 1.00. Buying 100,000 tokens moves supply to 1,100,000 and the price to 1.10, and the cost is the average of 1.00 and 1.10 times 100,000, which is 105,000 USDC. Selling those same tokens back immediately returns the supply to 1,000,000 and pays 105,000 minus any fee. A later buyer purchasing the identical 100,000 tokens at a supply of 5,000,000 pays about 510,000. Figures are illustrative.

Why it matters when you buy

A bonding curve makes your entry price a function of when you arrived, not of anything about the project. Before buying into one, read the curve's shape, whether selling back is permitted, and what happens at graduation, all of which are in the contract. Then check whether the token has any market beyond the curve at the buyability scores.

Related terms

• automated market maker — the pool-based alternative
• liquidity pool — where tokens go after graduation
• token — what the curve mints and burns
• burn — what selling back does to supply
• memecoin — the category launchpads mostly serve
• rug pull — the failure mode when the reserve is drained

Questions

Can I always sell back to the curve?

Only if the contract has a sell function and a reserve to pay from. Some designs are mint-only, which means the curve sets a price you can buy at and offers no exit at all.

Is the price on a curve a real market price?

It is the price the formula quotes given current supply. It reflects how many tokens have been minted, not what anyone would pay in an open market.

Why do launchpads use curves instead of a normal pool?

Because a curve needs no initial liquidity and no counterparty, so a token can launch with nothing but a contract. The reserve builds as people buy.