Cryptocurrency is continually improving the general finance framework that served as its forerunner. Mathematical models, historically implemented behind the curtain with a hand and a lever, may now be put into practice clearly and precisely thanks to distributed trustless ledgers and auditable smart contracts.
This opens the door to innovative token sale formats that go beyond Initial Coin Offerings (ICOs), Initial DEX Offerings (IDOs), and Initial Exchange Offerings (IEOs).
A Bonding Curve Offering is one such example (BCO). Rather than a single starter pistol for a coin's market introduction, BCOs aim to progressively bring a coin into the market, specified by a strict set of conditions, in order to equitably maximize value to individuals looking to support the project. The token – UMW – follows an Initial Bond Curve Offering, which is something very atypical in this world. Hence why we'd love to explain in detail what it is!
So what is a BCO?
A BCO is a set of crypto-economic parameters that, when implemented, reward all participants by incentivizing them to contribute to the project's adoption and growth.
A bonding curve is a mathematically specified price-supply relationship. In other words, as supply grows, so does the price. The method stipulates that each subsequent buyer of a token shall pay a slightly higher price than the previous buyer and a lower price than any subsequent buyer while providing tokens with sufficient liquidity that enables them to be freely traded within the bonding curve's public automated market maker (AMM) contract. This is a big step forward when we compare traditional coin offering models.
How does it work?
The tokens in a bonding curve contract are referred to as 'continuous tokens.' When there is demand for new tokens, the contract creates them while calculating the price increment automatically.
Bonding curves are often supported by token reserves gathered in return for the minted token, with the contract serving as the transaction's counterparty. This offers liquidity to purchase tokens back from users who want to sell them, resulting in an immediate market with liquidity that allows the token's price to be determined a posteriori rather than randomly. Bonding curves may be used with tokens featuring limited or unlimited supplies.
Why was the BCO used for the token?
BCOs help to maintain organic growth. The price climbs higher as more individuals enter the fray, drawn in by the project's products. Rather than an initial token dump, which may lead to dizzying upswings on release or downswings when investors pull out, tokens created on a bonded curve provide an incentive for the project to achieve its goals and for early participants to use the protocol to prove their commitment.
It prevents the all-too-common phenomenon of outrageous hype and waiting for the 'big moment' in fledgling crypto markets, which then goes on to make or break a project before it has a chance to really show itself. It also reduces the risk of project leaders abruptly dumping a large amount of coins onto the market and cutting the project's knees in order to benefit at the cost of the people who backed it. The ICO boom of 2018 was littered with such incidents that harmed not just the enterprises that used the concept but also public trust in the crypto industry as a whole.
In the case of Bonding Curve Offerings, an immediate market is established with its own liquidity and price determinism. The smart contract that governs it is unchangeable, and the project must generate demand for the token in order to raise its supply on the market. This steady sale over time ensures that a consistent supply of funds and collateral flows into the project in lockstep with the development of the protocol and the goods offered by the project.
With an understanding of how an IBCO works, there wasn't a chance it wouldn't have been used; in other words, aside from trading the token, the project is being developed by a solid organization. When one UMW token is sold, the money stays in the market, and UMW only takes a small part of the proceeds to fund the project's development. The project is self-funded and not dependent on the token sale.
There will be 300 million UMW tokens when the IBCO closes. However, due to the characteristics of the project, it will be impossible to mine additional tokens after the IBCO closes. Additionally, for each transactionпиши made, 1% of the transaction amount will be burned, reducing the number of tokens on the market and thus increasing their value. For further information, head over to the project's whitepaper.