🟢Bonding Curve Token (Part1)
General Definition of Bonding Curve
O Coin Powered By Mint.club
The bonding curve is a mathematical concept used in issuing digital assets, where the price of a token is determined by its current supply, based on a predefined price-supply relationship. When someone buys or sells these digital assets, the smart contract automatically calculates the corresponding amount of payment tokens (Base Asset). It mints new tokens for buyers by taking payment tokens into the bonding curve pool, or burns sold tokens, returning the Base Asset from the pool to the seller.
⭐⭐⭐⭐
🟢Bonding Curve Model in Mint Club
V2 Protocol
Mint Club employs the Discrete Bonding Curve (DBC) model, characterized by a step array that incrementally increases the price along the curve. In this design, each curve possesses price variation intervals, defining specific ranges where the price remains constant across each interval step. These intervals are denoted as BondStep[] { rangeTo, price }, allowing for structured and predictable pricing within the bonding curve.
This price step array-based bonding curve model offers two advantages over continuous price graph models like y = ax^b:
1.Testing the price step array model is much simpler compared to the y = ax^b curve. It eliminates the need for approximations in calculating power functions of the form (_baseN / _baseD) ^ (_expN / _expD), simplifying the process significantly.
2.Utilizing an array of price steps allows for straightforward calculations and complete customizability. In contrast, implementing a single continuous bonding curve model in Solidity can be overly complex or, in some cases, unfeasible.
⭐⭐⭐⭐
🟢 Buying/Selling Mechanism
Trading a bonding curve-backed asset works differently compared to traditional liquidity pool-based protocols such as Uniswap. In the AMM (Automated Market Maker) system, users swap one token for another directly through liquidity pools manually added by LPs (Liquidity Providers), based on the asset swap ratio determined by the pool’s algorithm.
In this setup, the tokens for purchase are already deposited in the pool by LPs, and users exchange paired tokens to acquire the target tokens from the liquidity pool. When users sell tokens, they return them to the pool and withdraw the paired tokens. This process is referred to as "Swap" because it essentially involves moving tokens between the user and the pool, without altering the token’s supply level.However, trading tokens on a bonding curve system is quite different. It involves a token minting and burning process when users purchase or sell bonding curve tokens.
Since there are no individual LPs and the contract automatically runs the pool through the bonding curve metrics, only the base asset (akin to the paired token in the AMM case) moves between the user and the pool, with trading tokens being newly minted for purchases and burned in selling situations.
⭐⭐⭐⭐
🟢Mint/Burn Overview
When tokens or NFTs are created using Mint Club, they come with an integrated price bonding curve and an automated liquidity pool backed by this curve. The token creator sets a specific price for each token supply level in advance.
Trading these bonding curve tokens/NFTs differs significantly from trading on AMM (Automated Market Maker) platforms like Uniswap:
🟢 Minting = Buying the Asset
Buying a bonding curve token involves the curve determining the base token amount to be paid, initiating a swap. The base tokens paid are stored in the bonding curve pool, and an equivalent amount of the bonding curve tokens is minted for the buyer.
🟢 Burning = Selling the Asset
Selling a bonding curve token means the curve calculates the base tokens to be returned. These are given back to the seller, and the corresponding bonding curve tokens are burned.
This mechanism ensures the total supply of the bonding curve asset adjusts with buying and selling activities, allowing the liquidity pool to function automatically based on market demand.
