Bonding Curve Mechanism

Bonding Curve Mechanism

The bonding curve mechanism is a mathematical formula that defines the price of the token based on the current supply and demand. In the case of Explode.fun, the curve is applied as follows:

• Pre-Liquidity Phase: During the initial phase, the token is sold in exchange for ETH. Buyers receive tokens based on the bonding curve pricing formula. As more ETH is accumulated, the token price increases incrementally.

• Liquidity Threshold: Once the ETH buy reaches a pre-determined market cap (the liquidity threshold), the system automatically triggers the bonding curve to add liquidity to Uniswap. The exact amount of liquidity provided is proportional to the ETH accumulated during the presale phase.

• Post-Liquidity Phase: After liquidity is added to Uniswap, the token is freely tradable, and its price continues to be influenced by the bonding curve. Buyers can now purchase tokens directly from Uniswap, benefiting from the previously added liquidity.

This process ensures a gradual increase in token price and a smooth transition from presale to live trading without sharp price fluctuations.