A bonding curve is a smart contract that automatically sets token prices based on supply. As more people buy, the price goes up; as people sell, it goes down. This creates a continuous market without needing a traditional order book.
The curve works because buys and sells directly interact with a reserve pool of funds, usually stablecoins. Each transaction moves you along the curve, determining your exact entry or exit price. The math behind it is straightforward: more supply means higher price per token.
Token graduation happens when a project decides to leave the bonding curve and move to a decentralized exchange like Raydium or Orca. At that moment, the project typically migrates liquidity from the curve's reserve pool into an AMM (automated market maker). This gives holders the ability to trade on an open, decentralized market instead of being locked into the curve's formula.
The tradeoff is real: bonding curves provide predictable pricing and continuous liquidity, but graduation offers more trading freedom and exposure to broader markets. Not all projects graduate successfully, and migration mechanics matter—bad execution can create slippage or price chaos.
Bonding curves let projects bootstrap liquidity, but graduation is where the training wheels come off.