Bonding Curve

Determine your endpoint's bonding Curve is an important process that can determine its success. This section explains whats bonding curve and how to choose effective bonding curve for your endpoint.

Overview

Pricing of services on the zap platform is determined via a pricing mechanism set by the provider known as a Bonding Curve.

Oracles and services on Zap are paid for in oracle or service - specific tokens. A sports-data oracle might answer queries about sports, but only when paid in their sports-data-token. These secondary tokens, we call 'Dots'.

Dots = Service-specific Token

Dots are generated by 'bonding' your Zap token to a specific oracle/service endpoint. Bond Zap to the sports-data oracle, get sports-data tokens back, redeemable for sports data.

Bond Zap, Get Dots. Unbond Dots, Get Zap.

The price of a Dot is set by the bonding curve. One can set a bonding curve to arbitrary polynomial functions. The following curve prices Dots according to the square of how many have been issued

Price (y-axis) vs Supply(x-axis)

Since the price is variable, the sports-data provider incentives potential subscribers to bond early on when tokens are cheap, and opens their Dots to a speculative market, where subscribers may use their Dots to pay for queries, or hold them and unbond when Dot reaches a higher price

Bond Low, Unbond High = Profit

This mechanic allows the oracle or service-provider to profit by bonding to their own curve at a cheap price, analogous to a startup founder's sweat equity or a cryptocurrency pre-mine

The next section will discuss generating Zap encoded curves from scratch