The concept of token bonding curves and their applications

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Today I will be composing a post about token bonding curves concept majorly on its application, before I go into the applications of token bonding curves is important we understand what this concept is really all about, ofcourse we are familiar with the concept of demand and supply it actually helps us to grasp this concept, only that in token bonding curves the supply and demand are represented using mathematical models which helps to show the relationship of a tokens current price in the market and it's current supply it's all based off a mathematical function and has many applications which I will be breaking down.

Applications token bonding curves

One of the useful application of bonding curves is the fact they are used in token issuance, that's the token bonding curves helps a great deal in ensuring one is able to get a token at a constantly changing price depending on what the supply is, as we know the higher the supply the more likely reduced the price will be and if the supply of a token is scarce like that of bitcoin for instance it will lead to a high price, so bonding curves helps us to get this token based on their supply which determines the price and most often decentralized project utilise token bonding curves like the intial distribution of token.

Bonding curves also serves as a good medium by which liquidity is provided to the market as the provide a platform for people to engage in the buying and selling of tokens and this is facilitated by the curve as it helps to determine how or what the price of a token is which is usually influenced the by shape of the curve at the time as it helps to show relationship between token price with it supply and how the price of a token varies with time depending on what the supply is which thus help people to know the price of the asset they are buying and it's value at the point in time and if it will be wise to invest at the time.

Token bonding curves are often used in decentralized autonomous organization, it also facilitate decentralized fundraising and makes it quite easy for the members of the autonomous organization to purchase token with relative ease as they are able to do this directly from the curves itself and this is also possible since this curves provides liquidity which means buying and selling won't be an issue and apart from providing a nice opportunity for the organization to buy it also does that with transparency and help them to be able to properly manage what little funds they have in this way token bonding curves provides a useful application.

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We know that cryptocurrencies market is a highly volatile one which means the price that attracted us to it may quickly change overtime but with bonding curves and it's mechanism to the changing prices of tokens in the market and it's ability to quickly adjust immediately and offer pricing depending on the current demand and supply of a token is really a fine initiative which could help to properly manage the volatility in the market as it provides all the information we need about price and supply, I mean based on the supply and demand we could know where an asset is heading towards in the mean time so bonding curves provides dynamic pricing which help to combat and better manage volatility.

Bonding curves also could help to manage the supply of a token, when a tokens circulating supply is high it could impact the price negatively but with bonding curves such project could initiate an automatic process where they buy back their tokens, when this project uses their personal funds to buy most of the tokens in supply it removes them out of the market thereby cutting the supply which helps to make the token more appealing to investors and help manage the supply which leads to likely price increase.

Conclusion

Banco, Uniswap. These are some of the examples of bonding curves we have, it will be wise for projects to carefully analyze most of the bonding curves to know which is most suitable for them depending on the unique characteristics of the bonding curve and ofcourse they generally have vast application which will be useful for all project token.