What is a community token?
Community tokens are a special type of digital tokens created and managed on a blockchain. They are designed to represent a brand and are used to create and incentivize social interactions in communities. Every community on Fundle has its own community token. The token defines ownership and is a proof of membership. Users can receive tokens via reward and loyalty programs or purchase them. With the tokens members can unlock specific and exclusive rewards or access to events, content or experiences. The tokens provide an opportunity for brands to engage with their members in innovative and economically incentivized ways.
Token bonding curves.
The mechanism we use to determine the price of tokens is based on a token bonding curve. This mechanism works via smart contracts on the blockchain. Our innovative token bonding curve protocol provides a dynamic approach to calculate community value by taking ecosystem growth into consideration. The curve recognizes if an ecosystem grows, so does the amount of the tokens (supply) and subsequently so does its value and price. This differs from how digital token usually determine value, namely based on scarcity with supply and demand.
In this way there is a predictable mechanism regarding price where both the community and business can be rewarded for the value they help creating. Engagement and benefits determine the added value and thus, utility of the token.
Community tokens are bonded to a reserve token and the price is determined by a relationship between the supply of a token and its price. We use USDC as the reserve token. This is a digital version (stablecoin) of the US dollar, pegged to the value of the US dollar. Therefore this token has a stable value and people can always sell their community tokens in exchange for USDC. For every purchase the contract locks in USDC and mints community tokens based on the current price and supply.
Price determination.
Factors that influence the the price of community tokens are the community token supply and the holding patterns of token holders. Each community has its own token bonding curve to facilitate the buy and sell process of tokens. The algorithm calculates the token price based on the supply of a token. Users can buy the token by providing collateral for the curve with USDC. At purchase a new community token is mint/created which increases the supply. When a token is sold, it is burned and so does the supply decrease.
When users buy a community token:
Buy $community -> $community mint -> increase of $community supply -> increase of price $community
When users sell a community token:
Sell $community -> $community burned -> decrease of $community supply -> decrease of price $community