What is a Bonding Curve

A bonding curve is a form of automated market maker (AMM) that employs algorithmic trading to determine the token's valuation. When a token is purchased, it is created and contributes to the overall token supply, advancing along the curve and elevating the price for subsequent buyers.

In contrast, when a token is sold, it is eliminated or extinguished, diminishing the total token supply, descending along the curve, and lowering the price for the next seller. The predefined structure of the bonding curve and the available token supply allow investors to acquire tokens using collateral and sell them directly through the system whenever they choose.

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