Paper 2026/483

Debt-Aware Bonding Curves: Non-Decreasing Floor Prices and Non-Liquidatable Borrowing

Michael Lewkowitz, House Markets

Tiago Santana, Floors Finance

Abstract

Decentralized lending protocols rely on liquidation mechanisms tied to volatile oracle-derived prices, creating cascading systemic risk during market downturns. We introduce debt-aware discrete bonding curves (DABC)—piecewise-linear bonding curves with a distinguished floor segment whose price is provably non-decreasing. A reserve invariant couples the curve’s collateral to outstanding debt, enabling a credit facility for issuance-native collateral in which borrowing capacity is anchored to the endogenous floor price rather than a market oracle. We prove that no loan originated at or below the floor-anchored LTV can become under-collateralized due to collateral price declines—eliminating protocol-triggered liquidation for this borrowing model. The trade-off: non-repayment results in permanent token lock, not forced sale. By internalizing issuance, trading, and borrowing in a single contract, the mechanism captures fee revenue that would otherwise accrue to external parties, directing it toward floor elevation. A recursive buy-lock-borrow-buy loop enables leveraged positions without liquidation risk; token launches are the most compelling application. To the best of our knowledge, this work provides the first fully formalized treatment in which borrowing safety is derived from a debt-aware reserve invariant and a provably non-decreasing endogenous floor price. We verify the mechanism through stateful fuzz testing and formal verification of a concrete Solidity implementation.

@misc{cryptoeprint:2026/483,
      author = {Ömer Demirel and Michael Lewkowitz and Tiago Santana},
      title = {Debt-Aware Bonding Curves: Non-Decreasing Floor Prices and Non-Liquidatable Borrowing},
      howpublished = {Cryptology {ePrint} Archive, Paper 2026/483},
      year = {2026},
      url = {https://eprint.iacr.org/2026/483}
}