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Bonding Curves

Bonding curves are a core economic primitive in Intuition, determining how the price of shares changes as more users stake tokens in Atom and Triple vaults.

What is a Bonding Curve?​

A bonding curve is a mathematical function that defines the relationship between the supply of tokens and their price. In Intuition:

  • Price increases as more tokens are staked
  • Price decreases as tokens are withdrawn
  • Creates continuous liquidity
  • Eliminates need for order books

How Bonding Curves Work​

Basic Mechanics​

  1. Initial Price: First stake gets shares at base price
  2. Progressive Pricing: Each subsequent stake pays slightly more
  3. Continuous Market: No waiting for buyers/sellers
  4. Deterministic: Price is always calculable from supply

Example Progression​

Stake 1: 100 tokens β†’ 100 shares (price: 1.00)
Stake 2: 100 tokens β†’ 95 shares (price: 1.05)
Stake 3: 100 tokens β†’ 91 shares (price: 1.10)
Stake 4: 100 tokens β†’ 87 shares (price: 1.15)

Curve Types in Intuition​

Linear Curve​

Simple linear progression:

  • Price = basePrice + (supply * slope)
  • Predictable, straightforward
  • Used for most standard vaults

Offset Progressive Curve​

More complex pricing with offset:

  • Allows for custom curve shapes
  • Can have different growth rates
  • Used for specialized vaults

Bonding Curve Demo​

Bonding Curve Interactive Demo

Parameters

Results

Current Price (ETH per share):1.0000 ETH
Purchase Cost:10.0000 ETH
Shares Received:10.0000
New Price (ETH per share):0.9091 ETH
Price Impact:-9.09%

Linear Curve Note: Initial deposits are 1:1 (ETH deposited = shares received). Subsequent deposits use the conversion formula: shares = (assets Γ— totalShares) / totalAssets.

Dynamic Pricing Benefits​

Intuition uses bonding curves to create dynamic pricing mechanisms that automatically adjust based on supply and demand. This sophisticated approach provides multiple benefits:

Automated Market Making

Liquidity is provided automatically through mathematical curves, eliminating the need for traditional order books or manual market makers.

LiquidityAutomated

Early Incentives

Early participants get better prices, encouraging adoption and rewarding pioneers who identify valuable data structures before they become widely recognized.

Early BirdAdoption

Supply Control

Prices increase as more tokens are minted, preventing inflation while ensuring scarcity creates value for established data structures.

ScarcityControl

Economic Alignment

Pricing automatically reflects the value of underlying assets, ensuring market mechanisms accurately represent the true worth of data and relationships.

ValueAlignment

Economic Implications​

For Early Stakers​

Advantages:

  • Get shares at lower prices
  • Earn fees from all future stakers
  • Benefit from price appreciation
  • Higher ownership percentage

Risks:

  • May not attract later stakers
  • TVL could remain low
  • Limited fee generation if unused

For Later Stakers​

Advantages:

  • Join proven, popular data
  • Higher confidence in value
  • More established signal

Disadvantages:

  • Pay premium prices
  • Lower ownership percentage
  • Less potential upside

Liquidity Benefits​

Always Available​

  • No need to find counterparty
  • Instant stake/unstake
  • Deterministic pricing
  • No slippage from order books

Price Discovery​

  • Continuous price updates
  • Reflects real demand
  • Self-balancing mechanism
  • Market-driven valuations

Curve Parameters​

Configurable Elements​

  1. Base Price: Starting price for first share
  2. Curve Slope: Rate of price increase
  3. Curve Type: Linear vs progressive
  4. Reserve Ratio: Backing percentage

Governance​

  • Curve parameters may be adjustable
  • Community governance controls changes
  • Different curves for different vault types
  • Balances accessibility and sustainability

Next Steps​