❓How does it work?
Why do we need the bonding curve mechanism?
The bonding curve mechanism brings some benefits:
Unruggable Tokens:
The bonding curve helps make the tokens "unruggable." This means the developers can't just take all the tokens and run away with them.
Fair Launch:
The bonding curve allows for a fair launch of the tokens. Everyone has an equal chance to buy the tokens as the price goes up. There's no pre-sale, private sale or pre-mint where some people get the tokens at a lower price.
Predictable Price:
As more people buy the tokens, the price goes up gradually according to the bonding curve formula. This makes the price changes predictable and avoids big, sudden price swings that could be risky for buyers.
No Need for Initial Liquidity:
With a bonding curve, the cryptocurrency project doesn't need to have a pool of 2 tokens like traditional AMM like Uniswap to start
What is the bonding curve?
The bonding curve is a mathematical formula that automatically adjusts the price of a cryptocurrency token based on the total supply, creating a smooth, predictable pricing mechanism.
But in the STXCITY the bonding curve adjusts the token's price based on how much the token sells.
How does the STX CITY Bonding curve work (user perspective)?
Deployment Summary
Step 1: Creation of the Token
You will create a token named 'ABC' with a total supply of 10 billion.
Step 2: Sending to DEX
Then the contract will send all 10 billion ABC to a bonding curve DEX. Users can immediately buy or sell ABC on that bonding curve DEX.
Step 3: Initial Pricing
The initial price of ABC is: $0.000004 (in case STX is $2)
Step 4: Market Cap Goal
Once the progress of the bonding curve reaches 100% (10,000 STX ), all the liquidity ($STX and ABC) from the bonding curve DEX will be deposited into a Velar address.
Step 5: Trading Pair and Liquidity
After that, the Velar team will create a trading pair and add liquidity for ABC.
Bonding curve vs AMM
The bonding curve is based on the formulas of traditional AMM like Uniswap to determine the price of tokens.
But here are some key differences with the bonding curve DEX
You don’t need to add LP to start the bonding curve DEX. There is a virtual trading that makes it tradable right away
Because the trading is not based on the LP added, the price of the bonding curve is predictable. More tokens sold means a higher price and vice versa, less token sold, lower the price
The Bonding Curve DEX itself provides the liquidity, rather than relying on external liquidity providers. This can make the system more robust and decentralized.
Permissionless: Everyone can create a bonding curve token without permission requirements. If the community likes it and buys the tokens, this token will be listed on Velar with fair distribution.
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