Mint Club's bonding curve-based token issuance offers numerous advantages for token/NFT creators, as outlined in the 'Benefits for Creators' section. But what about the token/NFT holders? Are there significant benefits for them too? Absolutely. Here are the three key benefits for token/NFT holders in relation to bonding curve-based issuance on Mint Club.
1) Stabilized Liquidity Pool
In the Mint Club platform, the liquidity pool for bonding curve assets is formed automatically by the bonding curve smart contract. When someone mint (buy) the bonding tokens, set amount of the base asset calculated through the bonding curve will be accepted, and bonded on the liquidity pool. This means that the amount of fund in the liquidity pool will be automatically increased when there are more purchases. Since there are no liquidity "providers," the fund on the liquidity is not able to be pulled by someone. Only way to reduce the pool amount is when someone sells their bonding asset.
This is a distinct approach compared to platforms like Uniswap, where the funds in liquidity pools are manually added by liquidity providers. Not just selling the tokens, but also pulling out their pool tokens from the liquidity triggers decreases in the liquidity pool value. There is a very typical scenarios in AMM-based liquidity pools when when token creators or major liquidity providers suddenly withdraw their entire stake from the liquidity pool, commonly known as "rug-pulling." Such actions can drastically devalue the asset, often leaving it virtually worthless.
However, because the Mint Club's liquidity pool operates through only the predetermined bonding curve contract and not through manually adding/removing liquidities by individual providers, it's immune to these sudden liquidity pool exits, thereby protecting the asset's value and maintaining trust within the community.
2) Controlled Asset Minting
A common threat to token holders in the crypto space is creators or teams suddenly increasing the total supply of tokens using the _mint function. This can be done for various reasons, but sometimes it occurs maliciously, such as when a hacker gains admin access and mints unlimited new tokens, draining the liquidity pool.
Such actions are impossible on Mint Club. The Mint Club contract exclusively manages the bonding curve pool, preventing both asset creators and core teams from accessing the minting function. This control mechanism effectively restricts any additional minting that could potentially devalue the assets held by current token owners.
3) Predictable Price Changes with Bonding Curve Model
The bonding curve model provides more predictable price changes compared to order book or AMM-based models, thanks to its predefined price-supply relationship set in the bonding curve contract. This arrangement enables precise calculations of the price impact when specific amounts of tokens are traded, a level of clarity not typically available in other models.
For instance, if a significant holder within a bonding curve model decides to sell a large portion of their holdings, the resulting price change can be accurately calculated. This is because the price at each supply level is predetermined, allowing anyone to foresee both the price changes and the reduction in the base asset pool.
In contrast, predicting exact price and liquidity pool changes is challenging in other models where liquidity is manually provided by individuals. A sudden sale of a large market share can lead LPs (Liquidity Providers) to quickly withdraw their funds in panic, causing more significant price drops than anticipated.