With the downturn in initial coin offerings, teams in the cryptospace have sought out alternative token-distribution methods. One solution to emerge is based on bonding curves, which are mathematical curves that determine the relationship between a token's price and supply. Bonding curves feature in a few cryptoeconomic models, such as automated market makers, token-curated registries, and continuous organizations.
Bancor is a well-known example of an automated market maker, as it allows Bancor users to always purchase or sell tokens via EDCCs (aka smart contracts), regardless of how many (or few) participants are within the network. These so-called Smart Tokens are continuously available due to their ability to automatically adapt to the supply and demand of the market.
Although there are multiple implementations of bonding curves in today's cryptoeconomic landscape, there is not a standardized interface among them. One project's automated market maker interface may not "speak" another interface's language.
To address this issue, Logan Saether of the cryptocurrency-focused personal economy platform Convergent drafted an ERC for bonded fungible tokens (i.e., the ERC20-compliant tokens controlled by a bonding curve EDCC). He described the benefit of such a standard to ETHNews:
"At the core of the matter what we really want are standard functions to buy and sell the tokens, and to fetch the price of buying or reward for selling some amount of token. A standardized interface would allow developers to build interoperable bonded fungible tokens, and later on to build more complex systems on top."
Bonded fungible tokens are of immediate interest to Convergent because, as Saether explains, the team is using them as building blocks for the platform. However, he believes that the core technology, coupled with a common standard, can be applied in various ways.
Saether suggests that one use of a standardized interface could be better information integration. With such an interface, block explorers like Etherscan would be able to automatically integrate token information, such as market cap or current price.
A more complex use, though, would include nested curves, which involve bonded fungible tokens acting as reserve assets for other bonded fungible tokens. Within this system, a token could, theoretically, possess an indefinite number of bonding curve layers. However, Saether admits that nested curves are "an active area of research"; he has not "seen any implementations … in the wild yet."
Saether has implemented example source code and test cases for the ERC in milky-way, which is Convergent's personal economy protocol, but he would like the community to suggest other possible implementations and improvements. Indeed, Saether has already received a bit of public feedback about the ERC.
For example, Joel Torstensson of the Web3 social data network 3Box said one of the specified functions would "make [the] UX really bad." He asserts that if two individuals were trying to purchase tokens within the same block with a correct payment amount, only the first transaction would be valid. "[T]he experience of buying tokens from the bonding curve [would be] really confusing," he continued.
Saether may be concerned with interoperability through a shared standard, but he encourages developers to build their own projects. The goal, rather than having a singular implementation, is to have different implementations interoperate in the future. In this way, the proposed ERC broaches a discussion about standards and interoperability in anticipation of future bonding-curve-related advancements. Saether simply "wanted to start laying the foundations [for standards] now."
Existing examples of bonding curve projects range from Apiary, "a curation market platform for the creation and funding of DAOs built on Aragon," to charitable giving, which developer David Truong has completed seminal work on. More generally, a continuous organization features bonding curves as a fundamental component of its economic model – it could not exist without a bonding curve EDCC.
Individuals interested in any of these projects, or in bonding curves and bonded fungible tokens at large, can contribute to the discussion on the ERC's GitHub issue.