What Is Pump.fun: The Rise and Controversy of a Meme Coin Giant
The meme coin sector of the crypto market is posting growth rates that make even the most conservative investors pause and think. In addition to becoming a viable consideration for many crypto investors, meme coins have helped create an entire subculture — the world of witty, funny, silly, obscene and sometimes outrageous memes that have become full-fledged assets traded on crypto platforms.
And just when you thought that the meme coin market couldn't "explode" further, Pump.fun has arrived on the stage, posting eye-popping revenues and enabling thousands upon thousands of new controversial and amusing meme coins. A Solana-based platform designed to help launch scam-free meme assets, Pump.fun has been reported to notch up daily revenues that beat the earnings of industry giants, such as Ethereum (ETH), Solana (SOL) and Uniswap (UNI).
It's easy to see why Pump.fun is attractive to users. The platform stresses that its token launch mechanism protects investors against crypto scams such as rug pulls through a fair launch system and the absence of any vesting and locking periods. Rug pulls and other types of scams are major — though not the only — detriments to meme coin investment. Pump.fun intends to change the status quo — and looks pretty darn serious about it.
Key Takeaways:
Pump.fun is a Solana-based platform that facilitates fair launches of meme coins, based on a unique bonding curve pricing model.
Launched in late January 2024, Pump.fun registered around 2.4 million token launches by the end of August 2024, emerging as the dominant force in the meme coin niche.
What Is Pump.fun?
Pump.fun is a platform for the fair issue of Solana-based meme coins. The app makes it easy for token issuers to launch new meme-themed assets flexibly and for free. Coins that manage to gain traction by achieving a market cap of $69,000 are then listed on Raydium, a leading decentralized finance (DeFi) app on the Solana blockchain.
Pump.fun enforces certain rules for token issuers to help investors minimize the risk of falling victim to rug pulls and other varieties of scams. This is achieved mainly through a fair launch mechanism that prevents issuers from allocating a portion of the token supply to themselves, their own team or other parties with whom they might have a relationship. Vesting and gradual release schedules are also not allowed.
Additionally, Pump.fun lets crypto investors buy meme coins via a bonding curve system that rewards early investors. The earlier you invest in a coin, the less it'll cost you, improving your investment's overall profit potential. This is in stark contrast to the traditional mode of investing, where your investment's timing has no meaningful relationship with its profit potential. All other things being equal, early investors in a successful coin on Pump.fun can expect more profit when they sell than those who join in at later stages.
Pump.fun was launched in January 2024, initially available only on Solana. As of early September 2024, the platform has also integrated support for two more blockchain platforms, the Ethereum-linked Layer 2 networks Blast (BLSTR) and Base. Meme coins themed around anything — from politics or animals to popular cartoon characters and viral historical internet memes — can be found among the extensive list of coins born on the platform.
The Rise of Pump.fun
The first coins were launched on Pump.fun in late January 2024, but the platform started to gain serious traction only in March. By the end of February, there were fewer than 1,500 meme coins issued via Pump.fun. A month later, however, the cumulative count of the tokens had exploded to more than 75,000. By the beginning of September, the platform's total token count stood at nearly 2 million! The project team claimed that, just during the three-hour interview on X between Elon Musk and U.S. presidential candidate Donald Trump on Aug 12, 2024, there were 10,000 new tokens issued on Pump.fun.
The chart below shows the cumulative number of meme coins launched on Pump.fun between the project's early June and early September, clearly demonstrating the stratospheric rise in the popularity of Pump.fun during its short history of less than a year.
Source: Dune.com
Pump.fun Successes and Challenges
Pump.fun's flexible and fair token creation services have driven its popularity to unprecedented levels as its cumulative revenue has already surpassed $100 million despite being launched for just over seven months.
Although the majority of meme coins launched on the platform have attracted minimal interest from investors, some coins already boast multimillion-dollar market caps, with at least five coins crossing the $30 million barrier as of Sep 4, 2024.
As of this date, the platform's leading coin is Fwog (FWOG), with a market cap of $74.49 million. A meme coin, it’s themed around a cute frog with long limbs described by its issuer as "just a lil fwog in a big pond."
Besides Fwog, the other four coins that currently hold over $30 million in market cap are cat-themed michi ($57 million), Daddy Tate ($45 million), Smoking Chicken Fish ($39 million) and Mother Iggy ($33 million).
Source: CoinGecko
Criticisms and Considerations
Despite these success stories, Pump.fun has attracted harsh criticism from some users and industry analysts, largely due to the fact that the vast majority of assets issued on the platform provide no value — and have resulted in losses for investors. On Aug 11, 2024, a blockchain analyst known as Adam Tehc published his analysis of Pump.fun data, showing an abysmal percentage of success for the tokens issued via the platform. According to the analysis, of the more than 16,000 assets launched during the chosen 24-hour period, only 175 attained market caps of at least $69,000 in order to qualify for a Raydium listing.
We must note, however, that although the probability of selecting an eventually profitable asset on Pump.fun remains low, it's nothing unusual for the meme coin sector. This is a niche in which most assets simply don't grow wings to fly. Meme coins have always been a choice for investors who love high-risk/high-reward scenarios. As such, much of the criticism based on low odds of success on Pump.fun is simply due to the nature of the meme coin market in general, rather than inherent deficiencies in the platform itself.
How Does Pump.fun Work?
Each token issued via Pump.fun is subject to a mathematically predetermined bonding curve model, which causes the price of the asset to increase as the number of buyers rises. This has two key implications:
Early investment in the asset is encouraged, with early investors standing to gain the most from the token's appreciation.
Ideally, early interest in the token and the predetermined bonding curve should ensure that the asset experiences rapid appreciation, letting it reach a significant market cap as quickly as possible.
Once the created tokens attain a market cap of at least $69,000, they’re listed for trading on Raydium, one of Solana's premier automated market maker (AMM) platforms. Upon listing, $12,000 of the token's supply is deposited in Raydium and burned. The burning mechanism should further support the token's price rise.
Pump.fun encourages a healthy token ecosystem, whereby all tokens created on the platform are subject to fair launch rules — no vesting schedules, allocations for own tokens, pre-sales or any other mechanisms to preferentially divert assets to specific investors.
Pump.fun Key Features
Bonding Curve Model
The bonding curve model, a distinct feature of Pump.fun’s platform, has a predetermined nature that ensures the price of the asset rises predictably as more tokens are sold. Thus, it helps provide stability to the price of Pump.fun's meme coins at the most crucial early stage of their market presence.
Incidentally, price instability and manipulation can lead to a loss of trust in a meme coin at the early stage of its lifecycle. When investors quickly spot issues with a meme coin, the exodus of interest and funds can destroy the asset in very little time. Therefore, the bonding curve model is designed to boost Pump.fun coins at the early stage by encouraging early investment and providing the much-needed stability and price predictability to build trust.
Instantly Tradeable Tokens
Thanks to the absence of vesting or reserve schedules in place, you can instantly begin trading Pump.fun-based meme coins. Coins attaining market caps of $69,000 also enjoy the exposure to Raydium's tremendously popular AMM.
Safety Mechanism Against Rug Pulls
Rug pulls have been a blight on the crypto industry, particularly in the realm of meme coins. Pump.fun minimizes the likelihood of rug pulls in two primary ways:
Its fair launch system discourages the preferential allocation of token supply to entities linked to the issuer.
The predetermined bonding curve model subjects each asset to a defined price trajectory, minimizing occurrences of price manipulation (which is frequently part of rug pull schemes).
However, it should be noted that no token issuing platform — including Pump.fun — can completely eliminate the possibility of rug pull scams. While Pump.fun has measures in place to minimize such scams, they can still occur, particularly in the world of meme coins. Additionally, it’s imperative to note that Pump.fun doesn’t prevent other crypto scams, such as pump-and-dumps, so always stay vigilant and observe any sudden and/or rapid price surges, particularly for the first few token transactions.
How to Create Meme Coins on Pump.fun
Creating meme coins on Pump.fun is straightforward and free of charge. Until early August 2024, token creators paid a fee of 0.02 SOL ($2.55 on Sep 4, 2024) to create a new asset. Following a fee structure change in early August, this initial fee is now paid by the first buyer of the token, with issuers not required to pay anything.
As the first step in the token creation process, you’ll need to connect a crypto wallet that supports Solana, such as Solflare, Torus, Ledger or any of the wallets supported by the WalletConnect protocol.
After connecting your wallet, click on the prominently displayed start a new coin button on the homepage to initiate the token creation process. You’ll need to provide the basic properties of your meme coin, such as its name, logo, ticker and description. You can then optionally add links to any relevant social media pages. That’s all you need to start a meme coin on Pump.fun.
How to Trade Meme Coins on Pump.fun
You can trade meme coins directly through Pump.fun. On each coin's dedicated page, you’ll see the Buy and Sell buttons that let you place direct orders for it. Each asset on Pump.fun can be swapped for SOL coins. The coins that have graduated to Raydium by meeting the $69,000 market cap requirement can also be traded via that platform as well.
Closing Thoughts
Thanks to its novelty and community appeal, Pump.fun is making a big splash in an environment casually used to big waves and storms — the Great Ocean of Meme Coins. With around 2 million assets launched on Pump.fun in just seven months, it's hard to write this platform off as simply another gimmick in the meme coin sector.
Importantly, Pump.fun is trying to address some critical issues for meme coins — the problems of rug pulls and early-stage price manipulations. It remains to be seen how successful the project's unique bonding curve model will be in the long term. So far, there's been no letup in the activity on Pump.fun, and a number of highly successful meme coins with multimillion-dollar market caps have launched with it.
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