Intro to Token Bonding Curves (TBCs)

What is a Token Bonding Curve (TBC)

A TBC is a pricing curve that establishes a functional relationship between the supply of a Coin and its current price.

A TBC acts as the underlying mechanism for an AMM (automated market maker) to facilitate buying and selling and overall the relationship between a Coin’s supply and price.

When someone purchases a Coin, that demonstrates demand meaning more Coins are created which increases the overall amount of Coins that exist. As the Coin supply increases, the price will also increase. When someone sells out of a Coin, it decreases the overall supply amount and subsequently affects the price.

It does not determine value - that is determined by the overall demand for a Coin which is ultimately determined by the different use cases and benefits a creator offers to Coin holders.

For more general reading/explanation on TBCs, check out this article.

Why Use a TBC

Because a TBC acts as the underlying mechanism for an AMM (automated market maker), it enables continuous liquidity without the counterparty complexity and volume requirements associated with a traditional order book.

What this Means for $RLY and Creator Coins

Coins are bonded to $RLY. Purchases of a Creator Coin are facilitated by an underlying purchase of $RLY traded to the target Creator Coin. $RLY is thus the base pair for all Creator Coins. This helps to loosely tie all Creator Coins together.

Demand for $RLY can increase the value of Creator Coins, and demand for Creator Coins can increase the value of $RLY.

In general, having a liquid base pair tied to many less-liquid tokens improves price stability, availability, liquidity, etc.