Pumping Out Profits (or Hype)?: A Look Inside The World of Pump.fun

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Pump.fun is a platform launched on Solana blockchain in January 2024 with a specific focus on launching meme coins. Ever since its launch, it has garnered favorable attention and has seen a steady increase in users.

Source: Medium

Standout Attributes of Pump.fun

• The focus of Pump.fun is on launching meme coins usually inspired by internet memes, jokes or trends which are mostly lighthearted.
• The process of creation of the meme coins is so user-friendly that it only takes a few minutes to create and launch a coin with a nominal fee of a few dollars.

• To create fairness, Pump.fun took few innovative steps at the launch of the tokens.

- It does not allow presales where early investors tend to take unfair advantage.

- Pump.fun has a “fair launch” policy which gives everyone the same chance to purchase the tokens at the launching price.

- It does not allow allocation of tokens to its creators thereby significantly reducing the chances of scams. This feature has attracted a lot of attention in the crypto space.

- A portion of the initial token sales is automatically locked in a liquidity pool which helps to maintain the price stability.

Pump.fun’s popularity has taken off since late March and is still on the rise. (Source: Dune)

Process

As soon as the token launches on the platform, users can purchase it using Solana’s native currency, SOL. Pump.fun effectively utilizes features of Solana such as faster transaction and low gas fee which makes it even more attractive for the developers.

The platform ensures transparency by disclosing all relevant information at the time of launch of the token. Token price is evaluated by utilizing a bonding curve. It means that the price of the token increases as more tokens are purchased, thereby incentivizing early buyers.

How a bonding curve works. (Source: TradeDog.io)

Performance Insights

The platform has now become a major revenue generator on Solana to an extent that it has surpassed Ethereum’s daily revenue. Since its launch it has attracted an increase in user engagement and significant economic activity.

Solana’s meme coins are on a hot streak: Outperforms Ethereum by 800% this year. (Source: CoinDCX)

Over the past couple of months, Pump.fun has contributed up to 35% of the Solana’s total fee revenue. Pump.fun has shown to generate as much as $2 million in daily revenue making it one of the largest revenue generators. Data suggests that a total of 1.2 million tokens have been deployed so far with a total revenue of about $51 million since its launch.

One of the major contributors to the success of Pump.fun is celebrity-themed tokens which were endorsed by Sydney Sweeney, Caitlyn Jenner, Iggy Azalea and Trippie Red.

Pump.fun revenue. (Source: Dune)

Potential Liabilities

• Pump.fun does not seem to have a rigorous vetting process which makes it vulnerable to pump-and-dump schemes.
• Since anyone can create tokens, bad actors can create tokens and pull scams.
• The tokens may be less secure due to its reliance on third-party wallets.
• In May 2024, a former employee manipulated the platform using flash loans to disrupt the token listings.

Source: CoinTracker

Pump.fun is not without risks. Avoid becoming a victim of Fear of Missing Out (FOMO). Doing proper research about the project and understanding the potential downsides before investing is essential.

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