Bonding Curve
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
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
