> For the complete documentation index, see [llms.txt](https://peeps-2.gitbook.io/peeps-docs/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://peeps-2.gitbook.io/peeps-docs/peeps-whitepaper/how-it-works/bonding-curve-and-graduation.md).

# bonding curve and graduation

## Bonding curve

A bonding curve is an automated pricing mechanism. Rather than matching buyers and sellers through a traditional order book, the smart contract calculates the token price from the amount bought or sold and the state of the curve.

The exact formula, virtual reserves and rounding behavior must be published from the final contract implementation.

## Graduation

Graduation is the transition from the launch mechanism to a decentralized-exchange liquidity pool.

The final production documentation must disclose:

* graduation threshold;
* settlement asset;
* destination DEX and pool type;
* pool fee tier;
* amount of liquidity created;
* whether LP positions are burned, locked or controlled;
* who can trigger graduation;
* whether the process is automatic; and
* treatment of unclaimed creator or platform fees.

{% hint style="warning" %}
Graduation is a technical milestone, not a statement that a token is safe, legitimate or likely to increase in value.
{% endhint %}


---

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