# How it works

## How it works

When a user buys a token, the platform mints a non-liquidating tokenized perp (leveraged token) on BounceTech in a single transaction. This opens a perpetual futures position on Hyperliquid. The leveraged token (LTs) enters the bonding curve and the user receives tokens in return. Selling reverses the process - tokens return to the curve, LTs are redeemed, user receives USDC.

The bonding curve tracks its value in USD. The USD value of the bonding curve can increase or decrease depending on trading activity as well as the performance of the LT it is paired with. Buys and LT appreciation increase the value of the Curve while sells and LT depreciation decrease its value. This means that unlike traditional launchpads, a token can graduate purely from the underlying asset moving in its direction (no new buys required). When the curve reaches $9K in USDC value the token graduates and liquidity is migrated to a HyperSwap V2 pool as a token/LT pair.

**Example**

1. A token is created with HYPE 3x Long as its underlying.
2. The creator buys $100 worth of the token.
3. Over the next 24 hours, HYPE goes up 10%. No one else buys or sells the token.

The HYPE 3x Long appreciates by roughly 30%. The user's position is now worth approximately $100 - $130 purely from the underlying asset moving in their direction.

***

**Leveraged tokens**

The reserve asset in every halc.fun bonding curve is a Leveraged Token (LT) issued by [BounceTech](https://docs.bounce.tech/). Each LT represents a non-liquidating, tokenized perpetual futures position on Hyperliquid, wrapped as a standard ERC-20.

LTs maintain a target leverage factor through automatic rebalancing. When the effective leverage drifts outside the target range due, the underlying perpetual position gets rebalanced back to its target leverage factor. This allows the LT to hold its leverage through sustained trends without requiring the user to manage margin or face liquidation.

Creators choose from 2x, 3x, or 5x leverage, and long or short direction, across any asset supported by BounceTech.

**Tradeoffs**

Constant leverage through rebalancing has a cost. In choppy or sideways markets, rebalancing converts volatility into drag on the LT's price. This is called volatility decay. LTs work in favor of the holder during sustained trends and against them during sideways chop.

Higher leverage amplifies both effects. A 5x LT benefits more from a sustained trend and decays faster in choppy conditions than a 2x LT.

For a full explanation of how LTs work, including rebalancing mechanics and fee structure, see the [BounceTech docs](https://docs.bounce.tech/).


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