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The Art of Price Discovery: When the Bonding Curve Meets NFT



Original Title: "The Art of Price Discovery, Nested Curatorial Markets, When Bonding Curves Meet NFTs" Foreword: In the traditional framework, there are three forces that dominate resource allocation, the market, the government and the third sector (ethics, religion) ,Non-profit organizations). In a market economy society, almost everything can be priced and traded. A common theory is that the equilibrium price is at the intersection of the supply and demand curve. In the secondary market, price discovery becomes slightly more complicated, at least taking time into account Factors, the power of long and short sides, circulation and transaction depth, etc. The bonding curve model is a contract for issuing tokens through the [buying and selling function]. The bonding curve model can be understood as a "price-circulation" curve that describes the functional relationship between "buying and selling prices" and "total issuance". It can also be understood as an automatic market maker that is automatically executed in the form of a smart contract. What is a Bonding Curve in essence? Its essence is to establish a decentralized collaboration mechanism in the chain environment, which integrates multiple elements such as time, counterparty, disk, depth, price, etc., and the algorithm is responsible for the allocation of resources in the entire collaboration mechanism. At present, at the theoretical level, a large amount of research on economic issues such as market economy and public goods distribution is still needed to solve problems including sybil attack (sybil attack), front running (order in advance), fork (fork), etc. But there is no doubt that the bonding curve provides us with a new perspective. PentaLaunch, which was recently acquired by Dorafactory, is a bonding curve auction platform, and its current main use is to raise funds for open source projects. The DAOrayaki decentralized research organization believes that for NFT pricing, the curation market will be one of the most important application areas of this joint curve model, but it may not be a continuous curve, but a discrete curve. Security Team: Rug Pull occurred in LARP, token price dropped by more than 80%: Golden Finance News, according to CertiK security team, on July 27, 2022 Beijing time, $LARP token fell by more than 80%, and the project has been confirmed as a fraud project. The deployer sold the initially minted LARP tokens for approximately $28,000 (20 ETH). The resulting funds are transferred through the Aztec Private Rollup Bridge. Users please be vigilant. [2022/7/27 2:40:30] Today, we will introduce a new concept, Re-Fungible Token (re-homogenizable token). When off-chain assets such as artworks and collectibles have been digitized into NFTs (non-homogeneous tokens), which can be reassembled and combined in the DeFi world, we should never stick to their pricing mechanisms Contrary to the traditional thinking of curating and auctioning. When Re-Fungible Token meets the bonding curve Core Author: Billy Rennekamp Reference: A compulsory course for the economic system of each application Dapp - Token Bonding Curve, Bonding Curve: An innovative exploration of token issuance methods | ONE.TOP Rating, Curation Market, etc. The focus of this article is to explore the use of ERC20 bonding curve token (Simon de la Rouviere, Bonding Curve Token) or liquidity token (Bancor, Liquidity Token) as the owner address of the ERC721 standard NFT. Unlike a specific person who owned a specific NFT in the past, people can hold a certain number of homogeneous tokens, which means they own an original NFT. I think this will be very helpful for the curation market of artworks, intellectual property and digital payments. Survey: Nearly 24% of people believe that the price of Bitcoin will be below $50,000 by the end of 2022: According to news on January 1, PlanB’s latest Twitter survey shows that nearly 24% of people believe that the price of Bitcoin will remain below $50,000, 31.1 % of people think that the BTC price will be between $50,000 and $100,000, 32.6% think that the BTC price will be between $100,000 and $200,000, and 12.6% think that the BTC price will exceed $200,000. (cryptopotato) [2022/1/2 8:19:33] Bonded Curves & Liquid Tokens (Bonded Curves & Liquid Tokens) has a special type of ERC20 token that allows users to directly buy and sell on smart contracts. Simon de la Rouviere calls them bonded curve tokens, and Bancor calls them liquid tokens, both of which refer to a smart contract that accepts ETH or another EC20 token in exchange for denominations minted into some new token. Simon de la Rouviere's version is named after the curve in which the price of each token (y-axis) is combined with the number of tokens in circulation (x-axis) via a predefined slope formula. The slope can be linear, exponential, logarithmic, or completely arbitrary, depending on the use case, but most commonly the price increases with the number of tokens in circulation. Here is a popularization of the mathematical connotation of the bonding curve (quoted from "Economic System Compulsory Course for Every Application Dapp - Token Bonding Curve, First Block Rhythm": No. 7090 Bored Ape was sold at a price of 600ETH, A record high: On September 3, CryptoSlam data showed that Bored Ape No. 7090 was sold at a price of 600ETH (approximately 2.269 million US dollars), a record high. [2021/9/3 22:57:16]About The function shape of the bonding curve, its type and design are only limited by human imagination. The Bancor protocol is the first set of design ideas with complete mathematical deduction from the price function to transaction pricing. The buying and selling functions are not The same linear function Take this mechanism as an example, 30% of the handling fee is charged for each sale. Assume that the buying curve is a simple linear function y = x. Then the selling function y = (1-30%)*x = 0.7x. The simple shapes of the two curves are shown in the figure below: Linear function with the same buying and selling functions Convex function curve type (including index type) Concave function curve type (Logarithmic type, inverse function type, polynomial type ) Connotation: where a and c represent that when the number of tokens is doubled by c times, the price of the token increases by a%. m and b are used as linear function parameters to adjust the intercept and slope. Taking the above formula as an example, this specific function The curve represents a 25% increase in price every time the number of tokens doubles. Bonded Curve Tokens & Curation Markets These bonded curve tokens are mainly described for use in curation markets, where The price of a token can represent the popularity of a theme. An example is Trend Forecasting, which can be done by buying and selling different tokens that represent different trends. People who predict the success of a certain style may buy tokens, expecting As the style gains fame and more people follow. Prices will rise as newly minted tokens generate profits for early adopters. Similar to a prediction market, it draws on the “wisdom of the crowd” through economic incentives. VOICE | Analyst: Whales are driving BTC prices up: Jinse Finance reported that since the beginning of January, Bitcoin has been relatively unstable in most cases. However, in the past week, Bitcoin’s turbulence has been the most obvious since 2020. Some Analysts are again blaming bitcoin whales, saying their activity has increased over the past seven days. Ashish Singhal, co-founder and CEO of CRUX Pay and, calls it the accumulation phase, during which whales No longer sitting and watching the cryptocurrency space, but actively participating. Whales eat up market liquidity, which affects the supply and demand ratio and causes volatility to re-enter the market.[2020 /2/22] Liquid Tokens & Market Makers (Liquid Tokens & Market Makers) Bancor refers to this technology as Liquid Tokens, emphasizing that tokens can always be bought or sold in any amount. They identify the relationship between buying denomination and selling denomination as the reserve requirement ratio. Rates below 1/2 grow exponentially, rates above 1/2 grow logarithmically, and rates above 1/2 grow linearly. The purchase price is calculated based on the total supply of tokens, the amount of the base reserve, and a predetermined reserve ratio. Bancor's goal is to support long-tail tokens that do not have a sufficient number of buy and sell orders (lack of trading depth and liquidity) on traditional exchanges. By encouraging the use of their own Bancor Network Token (Bancor Network Token) as a common buy-in denomination, they can provide exchange between different tokens. Voice | Li Qiyuan: If the price of BTC/USD continues to rise, USDT is actually collapsing: BTCC CEO Bobby Lee (Bobby Lee) said on his social media today that the current price of BTC/USD is 6,300 US dollars. If it rises to 6,500 US dollars, $8,000, or even more than $10,000. So is it really the price of Bitcoin that is going up? No, it is USDT that is crashing. [2018/10/12] Re-Fungible Token (RFT) Finally, we can start to think about the experiment I originally proposed: If an ERC721 NFT is bound by the address of an ERC20 Bonded Curve Token/Liquid Token Owned, what happens? Essentially, non-fungible assets will once again become fungible assets. The minting and unminting of these fungible tokens will be tied to a pre-defined price curve. It will eventually be possible to prove partial ownership of NFTs, just like proof of ownership of tokens through standard ERC20 interfaces. If I'm a wallet, I can check the NFT's Digital Asset Registry (DAR) to see who owns it. Then, I can check the owner's address to see if it's really an RFT contract. If so, I can use the balanceOf function to check if an address owns a certain amount of RFT tokens and verify partial ownership of the original NFT. Depending on the circumstances, some signals can be gleaned from the price of each token representing the asset. An RFT with a very high price must represent some expected high quality, such as a famous painting, a well-known IP, so that so many users are willing to buy it. These users may be rational participants who expect to gain profits from the further growth of the token, or they may be hard fans (emotional supporters) of this IP, regardless of their investment effects. The signal you get from the price of each token may vary depending on the type of NFT it represents. Art in the Curated Market There is no doubt that information asymmetries are rampant in the art market. This situation largely favors dealers and auction houses, who are often able to take advantage of higher asking prices to sell works by locking in prices and deliberately creating scarcity. Linking NFT artwork to Bonding Curve's Re-Fungible token will create a new trading system in which the value of the artwork is constantly updated with prices along with the curated market on Bonding Curve. Such a system can create a mechanism that favors artists, while investors with discerning taste reap the rewards through shrewd acquisitions. Artists can similarly speculate or pre-mint, or take advantage of inflation on the RFT for a sustainable revenue stream. In the case of inflation, there could be a spread on the buy-sell curve, the difference between which would be continuously paid to the author of the work, or there could be a simple fixed fee on each transaction. Basically, the artist makes money every time a work is sold. Of course, this situation may generate more questions than answers. To what extent does the price of an artwork-specific token reflect the quality of that work? What does it mean conceptually if a work of art can only be owned by one collective? Does this lead to a more or less ethical consumption of art? How much does the price fluctuate? Nested Investment Market (Nested Investment Market) The curation market in this context is nested, and each Bonding Curve Token accepts some base denomination when minted. This base denomination could be ETH, a stablecoin similar to DAI, or any other ERC20 token, including another Bonding Curve Token. An artwork NFT will reflect multiple pricing elements at different levels in our market. On one level, it may be a general investment token (GIT, general investment token), bound to ETH or stable currency. This GIT can be used to purchase different digital asset pools (DARTs, Digital Asset Registry), and these tokens can represent the entire NFT type; imagine a CryptoKitty DART, a celebrity DART, and a CryptoPunk DART. The final level will be RFT (Re-Fungible Token), purchased together with DART, representing partial ownership of a single NFT.


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The Art of Price Discovery: When the Bonding Curve Meets NFT

Original Title: "The Art of Price Discovery, Nested Curatorial Markets, When Bonding Curves Meet NFTs" Foreword: In the traditional framework, there are three forces that dominate resource allocation, the market.

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