What is a Bonding Curve
Initial Setup:
When a user creates a coin on cspr.fun, as an example the token starts with a total supply of 1 billion tokens, of which 800 million are allocated to the bonding curve for trading.
The remaining 200 million tokens are reserved for purposes like liquidity provision when the token graduates to Friendly.Market, a Casper-based DEX.
The token’s price begins at a very low value (close to zero) to encourage early buyers.
Bonding Curve Mechanism:
The bonding curve is a mathematical formula that ties the token’s price to the number of tokens purchased.
As users buy tokens, the price increases along the curve. Conversely, when users sell tokens, the price decreases.
For example:
If the first buyer purchases 1% of the supply, they pay a small amount (e.g., a fraction of a $CSPR).
As more tokens are bought, the price per token increases, so later buyers pay more for the same amount of tokens.
Selling works in reverse: selling tokens pushes the price down the curve, reducing the value per token.
Key Features of the Bonding Curve:
Continuous Pricing: The bonding curve provides a real-time, automated price based on supply and demand, eliminating the need for traditional order books until the token graduates to Friendly.Market.
Liquidity Provision: The $CSPR paid by buyers is stored in the bonding curve’s liquidity pool, which is used later when the token transitions to Friendly.Market.
Price Discovery: The curve helps establish the token’s market value organically, driven by community interest and speculation.
Graduation to Friendly.Market:
When the token’s market cap reaches $42k , the token graduates to Friendly.Market, a Casper-based DEX.
Once your token has graduated to Friendly.Market the creator will receive a reward of 21,000 $CSPR
A portion of the bonding curve’s liquidity (e.g., $10,000 worth of $CSPR) is paired with a portion of the token supply to create a liquidity pool on Friendly.Market.
The bonding curve is no longer used, and trading shifts to Friendly.Market’s automated market maker (AMM) model, where prices are determined by the liquidity pool’s ratio of tokens and $CSPR.
Example of Bonding Curve in Action:
A new token, “CASPERMOON,” is created on cspr.fun.
The first buyer spends 10 $CSPR to buy 10 million tokens when the price is near zero.
As more users buy, the market cap grows, and the price per token rises along the bonding curve. For instance, after 100 million tokens are sold, the price might be 0.00001 $CSPR per token.
If a user sells 5 million tokens, the price dips slightly, as the curve adjusts downward.
Once the market cap hits $42,000, CASPERMOON graduates to Friendly.Market, where $10,000 of $CSPR and a portion of tokens form a liquidity pool, and trading continues on the DEX.
Fees and Costs:
cspr.fun charges a 1% swap fee on buy and sell transactions on the bonding curve.
Why the Bonding Curve Matters
Incentives for Early Adopters: Early buyers get tokens at lower prices;
Fair Launch: The bonding curve ensures no presales or insider allocations, leveling the playing field (though “soft rug pulls” by creators buying and dumping remain a risk).
Automated Liquidity: The curve’s accumulated $CSPR ensures liquidity for trading on Friendly.Market, reducing the risk of illiquid markets post-graduation.
Limitations and Risks
Volatility: The bonding curve’s price swings can lead to significant losses for late buyers or those who sell during a dip.
Rug Pulls: Creators can buy early, hype the token, and sell large amounts, crashing the price before graduation to Friendly.Market.
High Failure Rate: Many tokens may fail to reach the DEX stage if they don’t gain enough traction to hit the market cap threshold.
Speculative Nature: Coins are highly speculative, and the bonding curve amplifies this by tying prices to short-term demand rather than fundamental value.
Summary
On cspr.fun, the bonding curve is an automated pricing system that increases a coin’s token price as more are bought and decreases it when tokens are sold, starting with 800 million tokens of a 1 billion supply. It rewards early buyers, builds liquidity, and drives tokens toward a $42,000 market cap for graduation to Friendly.Market, where trading shifts to a DEX liquidity pool. With a 1% swap fee, the curve fuels a speculative, community-driven coin ecosystem on the Casper Network, leveraging its fast, secure, and eco-friendly blockchain.
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