Understanding Bonding Curves

Every Trend and Pair on Zora uses a bonding curve to set prices. Instead of matching buyers with sellers in a traditional exchange, prices are determined automatically based on the number of tokens traded.

You don't need to fully understand bonding curves to trade on Zora, but a basic sense of how they work can help you make more informed decisions.

The core idea is simple: buying pushes the price up, and selling brings it down.

When tokens are purchased, the supply increases and the price moves up along the curve. Each subsequent purchase costs slightly more than the one before it. This rewards early participants who recognized value before others and took on more risk at lower prices.

When tokens are sold, the supply decreases, and the price moves down along the curve. This creates a natural market dynamic where price reflects the balance of buying and selling pressure over time.

A few things to keep in mind:

• Trade size matters. Larger trades move the price more than smaller ones. A $1,000 buy will shift the price more than a $10 buy.

• Price reflects demand. If the price is rising, it means more people are buying than selling. If it's falling, selling pressure is outweighing buying interest.

• Early buyers get lower prices. Because the price starts low and rises with each purchase, earlier participants pay less than later ones.

When viewing the holder list for any Trend or Pair, you'll see an address labelled "Bonding Curve." This isn't a person, it's the pool that holds the token's available supply.

Tokens held by the bonding curve are available for purchase. When you buy, tokens come from this pool. When you sell, tokens return to it.