NPM Fund: Continuous Token Bonding Curves for Open Source Funding

NPM FUND TL;DR: How the Bonding Curve Smart Contract Funds Open-Source Projects

This system solves the funding problem for open-source projects by creating a self-sustaining economic model powered by token bonding curves. Here’s how it works:

Continuous Funding Mechanism:
- Every time someone buys or sells tokens, a percentage of the transaction (e.g., 21%) goes to the project maintainers.
- This creates a reliable income stream for developers, funded directly by the community.
Early Supporters Fund Development:
- Early adopters buy tokens at lower prices, providing initial capital for the project.
- As more people join, the token price increases, rewarding early supporters and funding the project further.
Token Holders as Liquidity Providers:
- By holding tokens, you automatically provide liquidity to the bonding curve.
- You earn a share of transaction fees (e.g., 3%) without needing to actively manage liquidity pools.
No Middlemen or DEX Required:
- The bonding curve itself acts as the market, ensuring liquidity and eliminating the need for a decentralized exchange (DEX).
Anti-Whale and Pump-and-Dump Protection:
- The bonding curve’s design discourages large sell-offs, ensuring price stability and protecting the project from manipulation.
NFTs for Ownership and Support:
- Maintainer NFTs prove official ownership of the project, ensuring only verified maintainers can earn fees.
- Supporter NFTs reward early backers with permanent proof of their contribution.

How It Solves Open-Source Funding

1. Sustainable Income for Maintainers

Problem: Open-source maintainers often rely on donations or sporadic sponsorships, which are unreliable.
Solution: The bonding curve generates continuous funding through transaction fees. Every time someone buys or sells tokens, maintainers earn a percentage (e.g., 21%). This creates a predictable income stream tied to the project’s growth.

2. Community-Driven Funding

Problem: Traditional funding models (e.g., grants, donations) are centralized and limited in scope.
Solution: The bonding curve allows anyone to contribute by buying tokens. Early supporters get tokens at lower prices, while later supporters pay more, creating a fair and scalable funding model.

3. Incentivizing Long-Term Support

Problem: Many open-source projects struggle to retain contributors and supporters over time.
Solution: Token holders earn passive income through transaction fees, incentivizing them to hold tokens and support the project long-term. Maintainers can also use tools like the Drips Network to distribute earnings to contributors, fostering collaboration.

4. Transparent and Trustless

Problem: Traditional funding models often lack transparency, leading to mistrust.
Solution: The bonding curve operates entirely on-chain, ensuring transparency and fairness. All transactions and fee distributions are publicly verifiable.

Pseudo-Math: How It Works

1. Buying Tokens (Minting):

You send ETH to the contract.
The contract calculates how many tokens you get based on the current supply.
Example: If the supply is low, you get more tokens for your ETH. If the supply is high, you get fewer tokens.

2. Selling Tokens (Burning):

You send tokens back to the contract.
The contract calculates how much ETH you get based on the current supply.
Example: If the supply is high, you get less ETH per token. If the supply is low, you get more ETH per token.

3. Fee Distribution:

For every transaction, a percentage is taken as a fee.
Example: If someone buys tokens worth 10 ETH:
- 21% (2.1 ETH) goes to the maintainer.
- 3% (0.3 ETH) is distributed to token holders.
- 1% (0.1 ETH) goes to the platform.

4. Holder Rewards:

Token holders earn a share of the 3% fee pool based on their percentage of the total supply.
Example: If you own 10% of the tokens, you earn 10% of the 0.3 ETH fee pool.

Why This Works for Open-Source Projects

Early Capital Injection:
- Early supporters provide the initial funding needed to kickstart development.
- As the project grows, the token price increases, rewarding early backers and attracting more supporters.
Sustainable Growth:
- Transaction fees ensure a continuous flow of funds, allowing maintainers to focus on development rather than fundraising.
Community Ownership:
- Token holders are incentivized to support the project long-term, creating a strong and engaged community.
Transparency and Fairness:
- The on-chain nature of the system ensures that all transactions and fee distributions are transparent and verifiable.

Conclusion

This bonding curve system provides a decentralized, transparent, and sustainable funding model for open-source projects. By aligning incentives for maintainers, supporters, and token holders, it solves the funding problem while fostering long-term growth and community engagement.