Today we will be discussing new token economic models and techniques used with a focus on Bounding Curves and Continuous Token Models.
n is lower than token n+1 and higher than token n-1.
All these are possible because of bonding curve usage.
bonding curve
currentPrice = tokenSupply²:
bonding curve
The bonding curve indicates that the price increases while the token supply also increases. With this exponential curve case, growth rates increase and accelerate with the number of tokens minted. When someone buys a continuous token, every subsequent buyer has to pay a slightly increased price for every token to generate profit for earlier investors. With more people looking into the project and buying tokes, the token value constantly increases with the bonding curve. Therefore, the early investors who found and bought the continuous token early can sell their token back later on and earn a profit.
The contract of the bonding curve holds the balance of the Reserve Token. In order to purchase Continuous Tokens, the buyer will send an amount of ETH to a bonding curve's contract Buy Function. This will then compute the token price in an ETH and will then issue the right amount of Continuous Tokens.
Meanwhile, the Sell function works backwards wherein contracts calculate the Continuous Token’s current selling price. From there, they will send the right amount of ETH.
In order to make a successful decentralized system, there needs to be design incentives to encourage the network participants. This is so they will act in a way that will bring upon a win-win situation. The goal is to ease people into doing the right thing and make it a struggle to do the wrong one. Here are the cases in which bonding curves are used:
automated market maker
With this workflow, it requires a matching process for exchanges to happen. Market markers have to create orders that will be published on exchanges. Market takers have to look through orders and need to wait for it to get filled. Since both boy and sell orders have prices on them, market fluctuations may cause orders to take time to get filled.
Anyone has the chance to buy a Continuous Token anytime just by depositing a certain amount of the reserve token into the smart contract. At the same time, a seller has the ability to send back any amount to its contract which can remove the Continuous Tokens from circulation. It will also withdraw the same amount of Reserve Tokes from the AMM's balance and return them to the seller. This ends up with both AMM's Reserve Token Balance and Continuous Token's supply to decrease.
TCR
This token-curated registry makes use of a native token to assign curation rights in proportion with the relative token weight of the entities that have the toke. There are incentives rewarded to someone whenever they curate items that should or shouldn't be on the list. The product of this token-curated registry is a list like "Top 100 Classical Songs in America" or a whitelist of trusted entities.
Participants of TCR have to pay for tokens if they want to change something on the list. If they abuse the position or if their list is unpopular then they lose the token. There can be appeals made but they will cost you so making malicious attempts will be punished.
As long as there are members who want to be chosen into a list, the market exists wherein incentives of rational token holders are in line towards creating a high quality list.
With the progress of bonding curves, people will start to be motivated towards creating incentivized and adversarial games that will bring upon successful decentralized communities.