What is Bonding Curve?
Let's find out Bonding Curve meaning, definition in crypto, what is Bonding Curve, and all other detailed facts.
A bonding curve is a mathematical concept. It’s used to define the relationship between the price and supply of a particular asset.
When someone buys an asset of limited quantity (such as Bitcoin (BTC) or Binance Coin (BNB), which are programmed to have a limited supply), every buyer will have to pay more with subsequent purchases.
The price increase occurs because the volume of the asset progressively decreases with each acquisition, making it more valuable. This kind of financial mechanism is expected to be more profitable to the earlier investors.
The bonding curve plays an important role in the crypto market, as many cryptocurrencies, including the biggest one in the world, Bitcoin, are developed to be of a limited quantity.
Smart contracts known as bonding curve contracts have been created specifically for token issuance. These smart contracts are independent of crypto exchange platforms.
Using bonding curve contracts, users can buy or sell tokens with Ethereum (ETH). The average price of a token is used by converting its price into ETH to determine the base rate.
There is no limit to how many tokens can be created this way. The circulation is instead limited by how much ETH is in existence at the given time. Bonding curve contracts automatically ensure that as the number of issued tokens goes up, their price increases.