What if token supply wasn’t static, but instead responded dynamically to market conditions?

That’s the promise of Primary Issuance Markets (PIMs) and bonding curves: a game-changing approach to tokenomics. We’re breaking down important research to make a case for how bonding curves out perform fixed supply tokens.

Firstly, most tokens today follow a fixed issuance model. They’re either pre-mined, vested over time, or emitted through staking/inflation. But these models often fail to adapt to demand fluctuations, leading to price volatility, illiquidity, or mass dumps.

Enter bonding curves, an autonomous tool that programmatically adjusts token price and supply in real-time.

They work by defining a price-supply relationship via a mathematical formula inside a smart contract, like a vending machine that mints and burns tokens dynamically.

This isn’t new! Bonding curves have been widely used in Automated Market Makers (AMMs) like Uniswap. But their real power?

Primary Issuance Markets (PIMs)

Here, bonding curves aren’t just for trading but for minting and burning tokens at scale, based on demand.

Whereas bonding curves in AMMs serve for price discovery in secondary markets, bonding curves in PIMs serve for supply discovery in primary markets.

Think of a bonding curve-powered token sale like this:
💡 Early buyers pay less, later buyers pay more
💡 When tokens are sold back, they’re burned, reducing supply
💡 Price adjusts programmatically, preventing extreme volatility
💡 PIM helps the project build protocol owned liquidity and revenue stream

So, why is this important, you ask? It promises:
🔹 No more rigid, pre-set token supply
🔹 Markets determine token pricing dynamically
🔹 Potential for native revenue via fees and arbitrage

Unlike traditional Initial Coin Offerings (ICOs) or Initial DEX Offerings (IDOs), where a team dumps pre-minted tokens onto the market, PIMs let the market determine fair supply discovery.

So how does this actually work?
Research from @Bonding_Curves as part of an ongoing collaboration between @InverterNetwork and @BlockScience found that tokens with bonding curves outperformed fixed-supply tokens during the 2022 bear market. (Read more here: https://t.co/QAM03d3xBz)

Why? Adaptive supply = greater stability.

This means bonding curves could be the key to designing resilient token economies that:
✅ Scale with demand
✅ Resist extreme volatility
✅ Generate native revenue
✅ Don’t rely solely on secondary markets for liquidity

The not-so-obvious angles?
🔹 Governance implications- PIMs shift control over token supply from dev teams to the market itself
🔹 New funding models- Projects improve their revenue sustainability via issuance and redemptions fees
🔹 Programmable monetary policy- Dynamic supply = an on-chain central bank?

This isn’t just theory- it’s already in motion. (For example- we’re doing this for partners across the board!)

Protocols exploring bonding curve-powered issuance are laying the groundwork for a more efficient, self-sustaining DeFi ecosystem.

So TL;DR: If your tokenomics doesn’t account for supply-demand dynamics, it’s already outdated. PIMs and bonding curves lead to an adaptive token economy built for resilience.