Bancor’s Smart Tokens vs Token Bonding Curves

“Extrapolating upon this: it means that we will see currencies being minted for anything and everything. Not all of them have to have million-dollar+ networks. We can have personal coins: an investment in my network effect. We can have city-coins: an investment in the network of a city, etc. We can even go smaller: an investment in news, articles. Our imagination is the only limit. As long these coins float with each other (and it’s very easy to do), holding one coin over the other is simple a personal statement of where you want your value to reside.”

“A simple model on Ethereum would be as follows: investors can continuously join the organisation from the outside by allowing them to invest Ether in exchange for new shares. This issuance model follows an exponential decay. Each new transaction to invest, reduces the amount you get in exchange.

Invest 10 ether, get 10 shares.

New persons invest 10 ether, get 5 shares.


“ETH is exchanged for the bonds and goes into the community pot. Actions coupon are spent like Reddit and attention bonds to upvote content in this community. It has a simple algorithm to weight the ranking of the content.”

“To issue a coupon, one pays with another coupon such as ETH, for example, to mint a coupon based on the rate the protocol determines. This coupon is then dispensed for actions related to that topic. The cost of the coupon changes depending on interest in the coupon.”

“You might wonder to whom do the funds go to when buying these coupons? For each coupon bought, the buyer can choose where the funds go. It’s an additional signalling and coordination tool. The default would be for most topics to simply burn ETH. Burning implies a proof of sacrifice to be part of that “in group”. However, in some networks, having that ETH sent to someone or a group makes that network more valuable.”

“If more people are congregating around a meme (creating & dispensing the coupons for actions), then cost of the action coupons increase algorithmically. If novelty is *not* being produced, the cost starts to decrease (algorithmically).”

“The idea is that instead of pre-selling tokens during a launch phase, the tokens are minted as needed through various means. The tokens are then dispensed for services rendered in the network.”

“In the Summer of 2016, we started working on Bancor with the goal of creating a hierarchical monetary system (where one digital token holds other tokens in its reserve) to build a new type of standard for cryptocurrencies that would lay the foundation for a decentralized global exchange. One that is autonomous, has no spread, no counterparty risk and provides continuous liquidity for any asset. One that enables the long-tail of currencies as the Internet did for content.”

“All ETH that is used to mint the tokens are kept as a communal deposit.”

“One can leave at any point by taking a proportional percentage of the deposit pool with you.”

“- A token that can be minted at any time (continuous) according to a price set by the smart contract.
- This price gets more expensive as more tokens are in circulation.
- The amount paid for the token is kept in a communal deposit.
- At any point in time, a token can be withdrawn (“burned”) from the active supply, and a proportional part of the communal deposit can be taken with.
- The tokens are used to bond it to curators per sub-topic, who then curate information with their proportional backing.”

“Zap is introducing the economic mechanism of bonding curves for the first time into the smart contract ecosystem. No economic device like them have been released into the marketplace so far, though they have been inspired in part by Simon de la Rouviere’s writings on curation markets.”



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