Bonding Curve Sales

Bonding curve offerings use a mathematical pricing formula to automatically set the token price based on supply and demand.

Essentially, a smart contract sells tokens directly, with the price continuously increasing as more tokens are bought (and potentially decreasing if tokens are sold back).

This ensures constant liquidity and transparent price discovery without an order book.

For instance, bonding curve contracts create a market for tokens independent of exchanges, calculating the token’s price in Ether and issuing new tokens as purchases occur.

Early buyers pay less per token (rewarding early participation) and later buyers pay more as the token supply in circulation grows, creating a built-in incentive mechanism for adoption.

Projects like Reserve, Ampleforth’s early sale, and various art and utility tokens have used bonding curves to modulate distribution and reduce volatility.

The PoG model contrasts with bonding curves in several ways.

First, PoG doesn’t provide continuous buy/sell liquidity via a formula – it’s focused only on the initial distribution event.

Once tokens are distributed in PoG, trading is left to secondary markets or DEX liquidity pools established afterwards.

In a bonding curve sale, participants always trade against the contract (you can typically buy or sell back to the curve at defined prices);

in PoG, participants effectively “trade” against each other by burning gas, and the contract is just an arbiter of who burned how much.

Second, bonding curves are deterministic pricing mechanisms, whereas PoG is a competitive allocation mechanism.

In a bonding curve, if you want X tokens, the cost in ETH is predetermined by the curve’s equation given the current supply – no one can prevent you from buying except your own budget.

In PoG, if you want more tokens, you must outbid others in gas;

your cost is directly influenced by others’ actions (it’s an interactive game, not a fixed formula).

This means PoG can lead to emergent game-theoretic behavior: participants might try to strategize about when to send transactions or how to spread out their gas spending, but ultimately they cannot escape the actions of their peers raising the “price” (gas) of entry.

Another difference is capital destination. In bonding curve sales, the funds paid (ETH, DAI, etc.) typically go into a reserve or treasury, which the project may use or which backs the token’s value.

In PoG, the funds are essentially consumed by the network (burned or given to validators).

This makes PoG akin to a proof-of-work style distribution (sacrifice a resource to obtain tokens) whereas a bonding curve is more like an automated sale where the project still receives the funds.

PoG thus emphasizes decentralization and commitment over fundraising efficiency – any value spent is a deadweight cost from the participant’s perspective, serving only to signal demand and earn a share of tokens.

That said, PoG could be seen as creating an implicit bonding curve via gas pricing.

If more people are trying to get the token, they bid up gas prices;

effectively, the “price per token” (in terms of gas burned) rises as more tokens are claimed, similar to how a bonding curve raises prices as supply increases.

However, this emergent curve is not as smooth or predictable as a mathematical formula – it can be spiky and subject to external network conditions (e.g., unrelated network traffic also affecting gas costs).

Bonding curves are designed to modulate price gracefully, whereas PoG lets the open market and network state dictate the price of participation, which can result in more extreme conditions (both higher peaks and potentially lower lows).

For participants who prefer known pricing and guaranteed liquidity, bonding curves have an edge in predictability.

For those who value credibly neutral, on-chain competition and are comfortable with the risk/reward of a gas auction, PoG offers a very different, adrenaline-fueled experience.

One could say bonding curves favor algorithmic fairness (everyone faces the same price function), whereas PoG favors competitive fairness (everyone faces the same rules of competition).

Both aim to avoid the pitfalls of manual allocation, but they cater to different philosophies of how a “fair” launch should behave.