> For the complete documentation index, see [llms.txt](https://docs.toupee.tech/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.toupee.tech/bonding-curve-explained.md).

# Bonding Curve Explained

Bonding curve is the contract that governs the price dynamics of an ERC20 TOKEN via a dual bonding curve mechanism. There are two bonding curves that make up the tokenomics of $WIG. At this explanation, you can think of TOKEN as WIG, and BASE as ETH:\
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1\) A fixed-price curve that y = c, where the TOKEN price is invariant at 1 BASE/TOKEN (the floor price).- TOKENs are minted from floor reserves by exercising OTOKEN call options equivalent to the BASE amount.- TOKENs can be consistently redeemed from floor reserves at the floor price.​\
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2\) A variable-price curve that employs the xy=k formula for TOKEN price discovery. An initial TOKEN supply is created by using virtual assets.\
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\- Virtual tokens are minted into market reserves, balanced by a corresponding quantity of virtual BASE. TOKEN pricing on the market reserves spans a range of 1 BASE/TOKEN (lower bound) to infinity BASE/TOKEN (upper bound). The market reserve facilitates the buying and selling of TOKENs.\
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\- The integration of these reserves forms the comprehensive bonding curve for the TOKEN.\
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\- The constructs of floor reserves and market reserves underpin this contract.\
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\- Floor reserves are BASE pools allowing TOKEN redemption at a static floor price.\
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\- TOKENs are exclusively minted from floor reserves via exercising OTOKEN call options using BASE.\
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\- Market reserves incorporate variable amounts of BASE and TOKEN subjected to market-driven pricing derived from a virtual xy=k invariant. An initial TOKEN supply is minted into the market reserves wiith an equal virtual BASE reserve amount. TOKEN pricing in the market reserves varies from a minimum of 1 BASE/TOKEN (floor price) to an upper limit of infinity BASE/TOKEN.\
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\- The contract is designed to interact with external contracts including: OTOKEN, VTOKEN, and a FEES contract.\
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\- It is also equipped to levy protocol and UI hosting provider fees. The TOKEN's initial supply is minted to the bonding curve balanced by an equal amount of virtual BASE.<br>