A Token Generation Event (TGE) in Binance Wallet provides users with early access to new token offerings before public trading begins. This offers a secure and convenient way to access new token offerings directly in Binance Wallet (without a key).
For more information about TGEs, read the Binance Wallet TGE FAQs, pre-TGE, and booster campaigns.
Explanation of the bonding curve model
What is a bonding curve and how is it used in Binance Wallet TGEs?
A bonding curve is a mathematical mechanism used in blockchain and token economics that defines the relationship between the price of a token and its circulating supply. This mechanism autonomously determines how the price of the token adjusts as the supply increases or decreases.
Binance Wallet offers two types of Token Generation Events (TGE): fixed price and bonding curve. In the latter, the bonding curve mechanism is applied to dynamically manage the price and availability of tokens during the sale. Instead of a fixed price, during the event, users buy tokens with BNB, subject to individual purchase limits and a price determined by the bonding curve. These tokens can only be traded within the Bonding Curve ecosystem (i.e., among other users who also participate in the Bonding Curve-based TGE) during the subscription period. Users can trade these tokens on the event homepage before the official launch, allowing for greater participation and early trading.
If the maximum purchase limit is temporarily reached, subsequently placed purchase orders will go to a pending state and will only be completed when other participants sell the tokens. Orders placed during this limit phase cannot be canceled, and the BNB used will remain locked until the event concludes. The event operates with a countdown; once it ends, tokens can be freely traded and listed on Binance Alpha. If the event exceeds the number of participants, users who do not receive tokens can request refunds once it concludes.
Why do some TGEs use a bonding curve instead of a fixed price?
Built-in liquidity: Bonding curves support continuous buying and selling of tokens, ensuring the existence of a market from the project's launch and addressing liquidity challenges faced by new projects.
Demand-based pricing: prices adjust dynamically according to market demand, which can curb speculative hoarding, align prices with actual utility, and help maintain stability.
Decentralized distribution: allows for fair and permissionless participation: anyone can buy at the current market price, reducing dependence on centralized intermediaries or private allocations.
Timeline of a bonding curve-based TGE
Phase 1: Purchase using the bonding curve price
Users purchase tokens with BNB through their Binance Keyless Wallet, following a first-come, first-served model. These tokens can only be traded within the Bonding Curve ecosystem during the subscription period. Prices adjust dynamically based on demand, and individual purchase limits are applied to ensure fair participation.
Phase 2: Management of sold-out and ongoing purchases
If the maximum limit is temporarily reached, purchase orders can still be placed, and these could be completed as other users resell tokens, helping maintain the availability of tokens during the event. Please note that orders placed cannot be canceled, and the BNB used will remain locked until the TGE concludes.
Phase 3: Countdown and conclusion of the event
The TGE has a fixed countdown. After its completion, no new orders are accepted. Unfilled or excess orders due to oversubscription are canceled, and users can request refunds for their unused BNB once the event concludes.
Phase 4: Transferability and listing of tokens.
After the event concludes, tokens can be transferred out of the Bonding Curve TGE ecosystem. The project lists the tokens on Binance Alpha, thus opening the market for trading.
Important: Since this is a Bonding Curve-based TGE, token prices are not fixed and vary according to demand. The final price of the tokens you request may be different from expected. Ensure you understand and accept the risks associated with Bonding Curve TGEs.
What are the risks of joining a bonding curve TGE?
The price of tokens acquired through participation in Bonding Curve-based TGEs is not fixed and may fluctuate based on market forces and token demand. Tokens can only be traded among users who also participate in Bonding Curve-based TGEs during the subscription period. You are responsible for understanding and accepting the risks associated with participating in Bonding Curve-based TGEs, including, among others, market volatility, price dynamics, and project-specific risks. Participation in Bonding Curve-based TGEs does not guarantee gains, profitability, or liquidity. Users should conduct their own due diligence before participating.
Main benefits of the bonding curve model
What do the different shapes of the curve (like linear or steep) mean?
How do I know how many tokens I will receive when I buy?
Prices and funds
How does a bonding curve decide the price of the token?
The price of the token is determined by a predefined mathematical function linked to the total circulating supply. When tokens are bought, the supply increases as new tokens come into circulation, causing the price to rise according to the curve's parameters; conversely, when tokens are sold (resulting in a decrease in supply), the price falls. This price-supply relationship is algorithmically applied, typically through smart contracts.
How does the price change as more people buy tokens?
An increase in purchases expands the supply of tokens as new tokens enter circulation. According to the rules of the bonding curve, the price will increase accordingly. Later buyers often have to pay a higher price for the token, as the growth in supply drives the price up along the curve.
Can the price rise very quickly in a bonding curve sale?
If an increase in demand leads to rapid supply expansion, the price may skyrocket exponentially.
Where do the funds go after people buy tokens?
All funds raised through the bonding curve after the TGE will be added to the liquidity pool.
What happens to the token price after the TGE concludes?
After the TGE concludes, the bonding curve may remain in effect, regulating the price according to changes in supply. On the other hand, if the token is traded on external markets (such as exchanges), its price may decouple from the curve and be influenced by market forces such as trading volume and investor confidence. However, the residual effects of the curve (such as the initial dynamics between supply and price) could continue to affect long-term valuation.
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