What is a bonding curve in crypto?

A bonding curve is a pricing rule written into a smart contract. Instead of matching buyers with sellers, as an order book does, the contract itself quotes a price based on how many tokens are already in circulation. Buy, and the price for the next buyer goes up. Sell, and it goes down. Bonding curves are best known today from meme coin launchpads, covered in what Pump.fun is.

How does a bonding curve work?

DEXTools describes the curve as a formula linking price to circulating supply. Buyers send a base asset, such as SOL, to the contract and receive tokens. Sellers return tokens to the contract and get the base asset back from its reserves. The shape of the formula can be linear, polynomial or exponential. In a simple linear version the price equals a fixed slope times the supply, so each new token costs a little more than the last.

Because the contract is always the counterparty, there is always a quoted price, even for a brand new token with no other traders. This is similar in spirit to how automated market makers price trades from a formula, though a bonding curve is set up around supply rather than a pool of two assets supplied by outside providers.

What is bonding curve graduation?

On launchpads, the curve is only the first stage. DEXTools explains that during the curve phase the token has no exchange pool yet and buyers' funds stay locked in the contract. Once the reserve reaches a set threshold, the platform migrates the token. It typically uses the reserves to create a trading pair on a decentralized exchange and locks the liquidity permanently, for example by sending the pool's tokens to a burn address. Bitquery's documentation tracks how Pump.fun tokens move to PumpSwap, Pump.fun's own exchange, when they graduate.

What are the risks of bonding curve tokens?

DEXTools lists several. Automated sniper and MEV bots often buy the cheapest early tiers, leaving later buyers closer to the top of the curve. Coordinated early buying can concentrate supply in a few wallets, which can lead to sudden selling. Trading can thin out or pause around migration, and large sells afterward can move the price sharply. These patterns overlap with those in what a meme coin is and what a memecoin sniper is.

A bonding curve guarantees that a price is quoted, not that the price reflects any underlying value. This guide explains the mechanism and does not suggest trading such tokens.