Pump.fun is a Solana-based marketplace that allows users to create and trade their own meme tokens. Launched in January 2024, the platform quickly gained popularity due to its user-friendly interface, the simplicity of launching a token, low fees and making the volatile meme market extremely accessible.
The token launchpad reached $100 million in accumulated fee revenue in early September 2024. This was achieved in a record time of just 217 days after going live, making it the fastest growing dApp by revenue. Since launch, the platform has released over 2M tokens. It dominates the Solana token ecosystem, with around 50% of all token launches taking place on its website. Despite these impressive stats and meteoric rise, the platform has also faced negative backlash and even survived an exploit initiated by one of its founding members.
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Pump.fun drives Solana's memecoin market
Meme coin tokens typically have no intrinsic value. They are driven by community interest and trends, which is the market niche Pump.fun has specialised in. It's founder "alon" stated that his ultimate goal for the platform is to be the most fun place on the internet. The UI is extremely simplified and gamified, making it easy to interact with, while supporting interaction through visual queues. It also doesn't require any programming knowledge to use, and even the cost of providing a token has been eliminated. This dramatically lowers the barrier to creating new Memecoins and is reflected in the numbers.
The platform's revenue stream is a 1% trading fee. While revenues declined in August, there was an increase in September, possibly related to recent positive news from the Solana ecosystem. While the huge amount of tokens deployed can be seen as a driver of activity in the ecosystem, only a very small percentage of around 1% are successfully launched on a DEX such as Raydium.
The bonding curve and copycats
Before Pump.fun, the technical know-how and costs to launch a token were much higher. It was necessary for the token creator to lock a sufficient amount of SOL for liquidity to ensure token trading. Pump.fun gets around this by using Bond Curve contracts. These are smart contracts that create a market for tokens independent of decentralized exchanges (DEXs). When a token is launched on Pump.fun, an initial supply of 800 million tokens is placed into a bonding curve. As more tokens are bought, the price increases. The dynamic pricing model adjusts liquidity based on demand, ensuring fair pricing and preventing manipulation. Once the coin reaches a market cap of $69,000, it will automatically launch on the Raydium DEX with $12,000 in liquidity.
The success of Pump.fun has not gone unnoticed. Justin Sun, the controversial creator of Tron, created a copy of the protocol on his blockchain called 'SunPump'. Just two days after SunPump's launch, the Tron memecoin ecosystem was led by Sundog (SUNDOG). Sun's Memecoin reached a market cap of $100 million just 4 days after launch. Sun seems to see potential in the Memecoin market. It added $10 million to a "Meme Ecosystem Boost Incentive Program" to support token launches on the Tron blockchain.
The recent surge of @sunpumpmeme has driven massive attention to the the @pumpdotfun model again.
Our team has performed a comparative analysis for these two leading players in the memecoin launchpad space. Let's dive in below 🧵 pic.twitter.com/K6j2T0gAWX
— DWF Ventures (@DWFVentures) September 3, 2024
Questionable practices and exploit
The team behind the official X account relies heavily on memes to market their platform. Current trendiness of memes is the main driver behind the price increase of a memecoin. The account also releases questionable statements that cause a stir and attract the attention of more mainstream media. For example, the team supposedly confirmed that David Hirsch, former chief of the Securities and Exchange Commission's (SEC) crypto asset enforcement division, had joined pump.fun as head of trading. Binance even republished the news before it was later revealed that the statement was false.
We are excited to announce our new Head of Trading, David Hirsch!
After months of conversations with @a1lon9, David came to the realization that his work as a regulator was no longer fulfilling. He had to start a new chapter.
And what's better than doing the very thing you… pic.twitter.com/qJrHjNdHpD
— pump.fun (@pumpdotfun) June 17, 2024
Shortly before, the platform had been exploited by a former employee Jarett Dunn. Dunn siphoned off $2 million from the bond curve contracts. Sending tokens to his own wallet and other random addresses, then even retweeting the statements on his X account. He was arrested in London a few days later. The only reason he gave publicly for his actions is that he wanted to kill Pump.fun because it was hurting people. Some token deployers reportedly went to drastic lengths to gain internet fame.
One even accidentally set himself on fire but tweeted shortly after from the hospital bed that he would continue delivering for his fans. Community members criticized the platform for oversaturating the meme coin market, while others have hailed it as the main driver behind the meme coin mania. Shortly after the incident, Pump.fun issued a statement saying that they had updated the contracts and that the remaining total locked value (TVL) in the protocol was safe.
