Definition
Bonding curve pricing is a deterministic pricing mechanism in which the price of a token is defined by a continuous mathematical function of its circulating or contract-held supply. As tokens are minted or burned against a reserve asset, the bonding curve specifies the exact price at each supply level, removing discretionary price setting. This mechanism is commonly used in decentralized finance to create on-chain markets where liquidity and pricing are encoded directly in smart contracts.
Under bonding curve pricing, the contract acts as an automated counterparty that quotes buy and sell prices according to the curve, rather than relying on external order books. The shape of the bonding curve—such as linear, exponential, or more complex forms—determines how quickly prices respond to changes in supply. This makes the pricing behavior transparent and predictable, as all participants can derive the token price from the underlying formula.
Context and Usage
Bonding curve pricing is closely related to the concept of a bonding curve itself, which is the mathematical relationship between token supply and price. In practice, the pricing mechanism encodes this relationship into a smart contract that continuously recalculates prices as the supply changes. This allows token issuance, redemption, and market making to be governed by code rather than centralized intermediaries.
In decentralized finance, bonding curve pricing can resemble an AMM curve, where the contract maintains a reserve and adjusts prices algorithmically based on inventory. The mechanism is often used for bootstrapping liquidity, continuous token sales, or creating programmable markets for on-chain assets. Because the pricing is formula-based, it provides a clear, auditable rule set for how value flows between the token and its reserve asset over time.