> ## Documentation Index > Fetch the complete documentation index at: https://pnpprotocol.mintlify.site/llms.txt > Use this file to discover all available pages before exploring further. # How Bubblegum Works > The mechanics behind Bubblegum — bonding curves that feed prediction markets, two independent price axes, and automatic graduation to permanent liquidity. # How Bubblegum Works Bubblegum wires together two DeFi primitives — a **bonding curve** and a **prediction market AMM** — into a single atomic system. This page explains how they connect. ## The Architecture Every Bubblegum market consists of two linked components: ``` ┌─────────────────────┐ ┌─────────────────────┐ │ BONDING CURVE │ │ PREDICTION MARKET │ │ │ │ (CPMM) │ │ SOL ←→ $TICKER │────────→│ $TICKER ←→ YES/NO │ │ │ │ │ │ Determines: │ │ Determines: │ │ Token price │ │ Outcome odds │ │ Market depth │ │ YES/NO prices │ └─────────────────────┘ └──────────────────────┘ ``` When you buy YES on a Bubblegum market, two things happen in a single transaction: 1. Your SOL enters the bonding curve and buys \$TICKER 2. That \$TICKER flows into the prediction market and mints YES tokens for you You never touch \$TICKER directly. From your perspective, you're just buying YES with SOL. But under the hood, every trade simultaneously: * Moves the **token price** on the bonding curve * Moves the **outcome odds** on the prediction market * Deepens the **liquidity** available for future traders ## The Bonding Curve The bonding curve is a constant-product automated market maker that prices \$TICKER against SOL. It works like any bonding curve you've used before: * **Early buyers get more tokens per SOL** (price starts low) * **Each buy pushes the price up** (constant product math) * **Sells push the price back down** (fully reversible) * **No external liquidity needed** — the curve IS the market maker The curve launches with virtual reserves that provide initial depth. As real SOL flows in, the price rises along a predictable curve. Every market uses the same curve parameters, so pricing behavior is consistent and predictable across all Bubblegum markets. ### What the Curve Controls The bonding curve determines: * **\$TICKER / SOL price** — how expensive the market's token is * **Market depth** — how much SOL is backing the prediction market * **Graduation progress** — how close the market is to graduating It does NOT determine: * YES/NO odds (that's the prediction market's job) * Who wins at settlement (that's the oracle's job) ## The Prediction Market (CPMM) The prediction market uses a **Virtual Liquidity CPMM** — the same constant-product mechanism used in PNP's PAMM, adapted for Solana with SPL tokens. When the market launches, a portion of the token supply is deposited into the CPMM as initial reserve. This creates a 50/50 starting point for YES and NO odds. As traders buy YES or NO: * **Buying YES** increases the YES price and decreases NO * **Buying NO** increases the NO price and decreases YES * **Prices always sum to 1.00** (100%) The CPMM uses virtual reserves derived from on-chain state — no LP tokens, no external pool. The reserve grows as more \$TICKER enters from bonding curve trades, which means **liquidity depth increases with trading activity**. ### Price Discovery Both prices (token and outcome) are discovered independently: | A whale buys a lot of YES | Token price goes up (SOL entered the curve). YES odds go up (CPMM shifted). | | - | - | | Equal YES and NO buying | Token price goes up (SOL entered). Odds stay near 50/50 (balanced CPMM). | | Someone sells all their YES | Token price goes down (SOL left the curve). YES odds go down. | This means you can express nuanced views: * "This question is important but I don't know the answer" → buy \$TICKER, don't trade YES/NO * "I'm sure about the outcome but the market is overhyped" → sell \$TICKER, buy the outcome you believe in * "I'm bullish on everything" → buy YES with SOL (naturally does both) ## Graduation When enough SOL has entered the bonding curve, the market **graduates**. This is a one-time, irreversible transition. ### What Happens at Graduation 1. The bonding curve locks — no more curve trades 2. A reserved portion of \$TICKER supply pairs with the collected SOL 3. Together they seed a **permanent AMM pool** with locked liquidity 4. \$TICKER now trades freely on the open market ### After Graduation * **\$TICKER** trades on its own AMM pool — anyone can buy/sell freely * **The prediction market keeps running** — YES/NO trading continues until settlement * Users can buy \$TICKER on the open market and route it into the CPMM for directional bets * The token lives on even after the prediction market resolves ### Why Graduation Matters Graduation creates a **permanent secondary market** for the token. Unlike traditional prediction markets where the market disappears after resolution, Bubblegum markets leave behind a tradeable on-chain token. The graduated AMM pool has its liquidity permanently locked — it can never be rugged or drained. ## The Full Lifecycle ``` 1. CREATION Creator submits a question + ticker → Token mint, bonding curve, and prediction market created atomically → Market opens at 50/50 odds 2. CURVE PHASE Traders buy YES/NO with SOL → SOL enters bonding curve → $TICKER flows to CPMM → YES/NO minted → Token price and odds move independently → Curve progress bar fills toward graduation 3. GRADUATION Bonding curve reaches threshold → $TICKER + SOL seed a permanent AMM pool → Liquidity locked forever → $TICKER trades freely 4. POST-GRADUATION Prediction market keeps running → Traders buy/sell YES/NO through the AMM pool → $TICKER is also tradeable independently 5. SETTLEMENT After the market's deadline, the outcome is declared → Winners redeem their YES/NO tokens for $TICKER from the CPMM → A portion of remaining $TICKER goes to the creator → A portion is burned (deflationary) → $TICKER continues trading on its AMM pool ``` ## Why This Design Works The bonding curve solves the **cold-start problem**. Traditional prediction markets need someone to put up capital before trading can begin. Bubblegum's curve provides liquidity from the first trade — no subsidies, no market makers, no manual seeding. The two-axis design creates a **natural attention market**. Token price acts as a proxy for how much the world cares about a question. This is information that traditional prediction markets can't capture — they only tell you the odds, not how important the question is. Graduation creates **permanence**. The token outlives the prediction. Communities can form around tokens. Resolved markets leave behind tradeable artifacts. This turns prediction markets from ephemeral events into lasting on-chain assets. This documentation is built and hosted on [Mintlify](https://mintlify.com), a developer documentation platform.