How It Works

Phase 1 · The bonding curve

When a collection launches, every buy and sell goes through peg.fun's bonding curve, which lives inside a Uniswap v4 hook. The price increases as more PEG is bought, so early buyers get a lower price and later buyers pay more.

All ETH paid into the curve stays in the contract. There is no external market maker, no order book, and no AMM pool yet. The curve is the only price source until graduation.

Every buy on the curve does three things in one transaction:

1. ETH is sent to the PegHook contract.
2. The hook routes the swap through Uniswap v4's PoolManager.
3. PEG tokens are minted directly to the buyer's wallet, and one on-chain object is minted per whole 1.0 PEG received. Fractional PEG becomes dust.

Phase 2 · Graduation

When a buy would push the curve past 4.16 ETH, the hook triggers migration atomically in the same transaction. The buyer pays the migration gas as part of their buy. No separate trigger, no admin call, no countdown.

At graduation:

1. A new Uniswap v4 pool is created for PEG/ETH with the protocol's fixed fee tier and the same hook.
2. All ETH and remaining PEG in the curve are deposited as initial liquidity into that pool.
3. The LP position representing that liquidity is sent to 0x…dead, burned forever. See LP burn.
4. The bonding curve permanently disables. All future swaps route through the Uniswap v4 pool.

Graduation is one-shot and irreversible. There is no admin key that can cancel it, delay it, or reverse it.

Phase 3 · Post-graduation swaps via DirectSwap

After graduation, peg.fun routes every swap through DirectSwap, its own router. DirectSwap is required because aggregator routes (1inch, CowSwap, ParaSwap, the official Uniswap widget) break the object-mint guard inside the token contract.

Holder fee distribution

Every swap after graduation pays a small fee. There are no liquidity providers to pay (the LP is burned), so the fee flows back to PEG holders via a balance-weighted accumulator inside the hook.

Holders claim accumulated fees by clicking "Claim ETH" on the token detail page. The longer you hold and the more PEG you hold, the more you accumulate. See How to claim holder fees for the mechanics.

The object-mint invariant

1.0 PEG = 1 object at all times. This is enforced at the contract level:

1. Buying a whole token through DirectSwap mints one fresh object to your wallet.
2. Selling a whole token through DirectSwap burns the oldest object you hold.
3. Transferring PEG to another wallet transfers the matching objects atomically. There is no "orphan" ERC-20 balance.
4. Fractional PEG that didn't complete a whole object becomes dust , which has ETH value but does not mint an object until you accumulate enough to cross the next integer boundary.