Galaxy research head Alex Thorn said the SEC’s plan to repeal Reg NMS Rule 611 and Rule 610(e) could mark a turning point for tokenized equities, on-chain liquidity pools and AMM-based securities trading.

Galaxy research head Alex Thorn said the SEC’s proposed repeal of Reg NMS Rule 611 and Rule 610(e) could remove a major market-structure obstacle for tokenized stocks, on-chain AMMs and securities trading innovation.

A bonding curve is a mathematical formula that directly links a crypto asset's price to its circulating supply, shifting valuation from human guesswork to deterministic code. This comprehensive guide explores the two core use cases—token issuance and automated market maker (AMM) swaps—and breaks down the step-by-step interaction between the user and the smart contract, including collateral deposits, minting, distribution, and the reverse burning process. It also analyzes the economic incentives created by different curve shapes, from linear and exponential to logarithmic and sigmoid designs, and examines their real-world applications in SocialFi platforms like Friend.tech, launchpad graduation mechanisms on Solana, and institutional projects such as BIS’s Project Mariana for CBDC settlement. Additionally, the article evaluates critical limitations, including deterministic slippage, smart contract vulnerabilities through flash loans, the SEC’s 2026 Category 1 security guidance, and NBBO divergence risks when the on-chain price drifts away from global market best bids and offers.

A bonding curve is a mathematical smart contract mechanism that directly links a crypto asset's price to its circulating supply, effectively replacing traditional order books with an automated, always-available counterparty. This in-depth guide explains how bonding curves work step-by-step, detailing the deposit, minting, distribution, and price adjustment processes. It distinguishes between primary issuance curves that create and destroy tokens, and AMM curves that govern swaps between existing assets. The article explores common curve shapes—linear, exponential, logarithmic, and sigmoid—and their specific economic incentives and risk profiles, such as early-buyer advantages and volatility. Real-world applications are thoroughly covered, including SocialFi platforms like Friend.tech, IDO token launches with graduation mechanisms on networks like Solana, institutional CBDC settlement via Project Mariana, and tokenization of real-world assets like municipal bonds, noting legal frameworks like the US Master Indenture. The analysis also addresses key benefits such as 24/7 deterministic liquidity and transparency, alongside critical risks like front-running MEV sandwich attacks, smart contract vulnerabilities, regulatory implications under SEC guidance (e.g., Category 1 securities and Form 1099-DA), and NBBO divergence. The concept of 'bonding curve progress' is demystified, warning against FOMO and high slippage for late entrants, making this a crucial resource for advanced traders and DeFi participants.