Bonding Curves

HbarSuite allows Liquidity Providers to be their own Market Maker and choose from two types of bonding curve: Linear and Exponential. Depending on which type of bonding curve a pool uses, the price will be adjusted differently when an asset is bought from or sold to the pool.

Linear Curve

With a linear bonding curve, the price of an NFT is increased by a flat amount (called Delta) every time an item is bought from the pool. Conversely, the price of the NFT is decreased by that same flat amount every time an item is sold to the pool.

Example: A liquidity provider may create an NFT/HBAR pool with a Start Price of 100 HBAR and a delta of 10 HBAR. Assuming they provide enough liquidity, the spot price of an NFT will increase to 110 HBAR after one item is purchased from the pool. After a second item is purchased, the price will increase to 120 HBAR, and so on and so forth. Conversely, if an NFT is sold to the pool, the price will decrease by 10 HBAR.

Exponential Curve

With an exponential bonding curve, the price of an NFT is increased by a certain percentage (also called delta) every time an item is bought from the pool. Conversely, the price of the NFT is decreased equivalently every time an item is sold to the pool.

To calculate the equivalent decrease, convert the the percentage to a decimal index (e.g. for 50%, the index would be 1.5) and divide the price by this number.

Example: a Liquidity Provider may create an NFT/HBAR pool with a Start Price of 200 HBAR and a delta of 50%. Assuming they provide enough liquidity, the price of an NFT will increase to 200 + 50% = 300 HBAR after one NFT is purchased from the pool. After a second item is purchased, the price will increase to 300 + 50% = 450 HBAR, and so on and so forth. Conversely, if an NFT is sold to the pool, the price will be decreased by 1.5.