Definition
A bonding curve is a formal pricing rule that defines how the price of a token changes as its circulating supply increases or decreases. It is typically expressed as a mathematical function embedded in a smart contract, ensuring that every buy or sell operation is executed at a price determined solely by the current token supply. Because the pricing is deterministic and programmatic, participants can infer how the token price will evolve as supply moves along the curve.
In DeFi, bonding curves are often used to automate token issuance, redemption, and partial liquidity provisioning without relying on traditional order books. The curve can be designed to be convex, concave, or piecewise, shaping how aggressively price responds to changes in supply and influencing token distribution and capital formation dynamics.
Context and Usage
Bonding curves frequently appear in tokenomics designs for a Token Launch, where early and later participants face different prices according to the curve’s shape. The underlying function determines how much capital must enter the system to mint new tokens and how much value can be withdrawn when tokens are burned, directly affecting perceived fairness and sustainability of the model.
When integrated with a Liquidity Pool or other automated mechanisms, bonding curves influence Price Impact by defining how sensitive the token price is to marginal trades or supply changes. Within DeFi more broadly, they serve as a foundational concept for experiments in continuous token sales, protocol-owned liquidity, and alternative market-making architectures that rely on transparent, on-chain pricing rules.