What Is a Bonding Curve?

A bonding curve is a smart contract mechanism that algorithmically sets token prices based on the total supply in circulation. As more tokens are purchased and minted, the price increases incrementally according to a predefined formula. This creates a fair pricing curve that rewards early adopters with lower costs while charging later buyers more, reflecting the reduced risk and increased utility of a mature project.

In OASA's model, bonding curves are implemented through a "Commons Market Maker" smart contract that mints new tokens when people buy in and can burn them if people sell back. The curve naturally caps token supply at the project's physical capacity, ensuring the community cannot oversell beyond what the land and facilities can support. See Rethinking Wealth for the economic analysis.

How It Works

Price Progression

At Traditional Dream Factory's launch, the initial token price was set at €222. As each additional token is purchased, the price increases according to a formula designed to reach roughly €420 per token at full project capacity. Early supporters who took on more risk bought tokens around €200–250, while later buyers will pay higher prices (approaching €420) once the village is fully built and proven.

Capacity Constraints

The bonding curve is designed to cap token supply at the project's physical capacity. At TDF, the target is 18,600 $TDF tokens, corresponding to the total number of bed-nights available per year once all planned rooms are built. This ensures an equilibrium between membership size and ecological carrying capacity.

Preventing Speculation

Tokens are initially non-transferable (vested) during the build phase to prevent speculation. Only once the project reaches its funding and construction milestones do tokens become freely resellable. This staged approach ensures capital is locked in to complete construction before tokens can be traded.

Benefits of Bonding Curves

Fair Pricing

Early supporters who take on more risk (investing before the project is proven) pay lower prices. Later buyers who benefit from reduced risk and increased utility pay higher prices. This creates a fair distribution of costs that reflects the actual value and risk at different stages.

Automatic Capacity Management

The curve naturally prevents overselling by capping supply at physical capacity. As the price increases toward the capacity limit, it becomes more expensive to buy tokens, naturally slowing demand to match available resources.

Continuous Capital Formation

Rather than a single fundraising round, bonding curves enable continuous capital formation. As the project develops and becomes more attractive, new members can join at prices that reflect the current state of the project.

Transparent and Programmable

The pricing formula is encoded in a smart contract, making it transparent and auditable. Anyone can see how prices are calculated and verify that the mechanism is fair and functioning as designed.

Comparison to Traditional Fundraising

Versus Fixed-Price Rounds

Traditional fundraising often uses fixed-price rounds (seed, Series A, etc.) where all investors in a round pay the same price. Bonding curves create a continuous price progression that more accurately reflects the changing risk and value of the project over time.

Versus Auction Models

While auctions can discover market prices, they can be complex and favor those with more capital or information. Bonding curves provide a simpler, more predictable pricing mechanism that's accessible to all participants.

Implementation at Traditional Dream Factory

At TDF, the bonding curve has enabled the project to raise capital continuously as it develops. In 2025 alone, TDF sold approximately €106,000 worth of tokens to new members. The proceeds finance land developments, water systems, solar energy installation, and accommodations.

The curve ensures that as the village becomes more built and proven, token prices reflect this increased value. Early supporters who bought at €222 benefit from lower costs, while the project benefits from their early capital and risk-taking.

Mathematical Considerations

The exact formula for the bonding curve is detailed in the OASA whitepaper's appendix. The key principle is that price increases as supply increases, but the rate of increase can be tuned to balance early accessibility with long-term sustainability. The curve must be steep enough to reward early supporters but not so steep that it becomes prohibitively expensive too quickly.

Future Applications

Bonding curves could be applied to other regenerative projects beyond land stewardship. They could finance watershed restoration, community infrastructure, or other public goods where capacity constraints exist and early supporters should be rewarded for taking on risk.