NFT Pricing
NFT Pricing using Bonding Curves
Last updated
NFT Pricing using Bonding Curves
Last updated
NFTs in Potion Protocol are priced according Bonding Curves.
A bonding curve is a mathematical function describing the relationship between the price and supply of an asset.
When tokens are purchased a bonding curve, each additional purchase drives the price up by an additional amount.
Likewise, selling tokens results in the price reducing along the curve.
Currently, Potion Protocol only supports a single type of price curve: the xy=k curve.
The xy=k curve prices assets directly according to their ratio in the pool.
A pool with 10 NFTs and 10 ETH would therefore price the NFTs at 1ETH each.
Buying an NFT from the pool would raise the price to 11 ETH / 9 NFTs = 1.22222 ETH per NFT, while selling would reduce the price to 9ETH / 11 NFTs = 0.818181 ETH.
The larger the amount of liquidity in the pool, the smaller the price change will result from each buy or sell.