"Massive Pump" on Solana? Interpreting the Ecological Growth Engine Pump.fun

Author: Nan Zhi, Odaily Planet Daily

In April, the market experienced a significant correction, yet the Solana market became increasingly vibrant. On May 4, the newly issued SPL tokens reached a historic high of 14,648. More than half of the newly issued tokens came from pump.fun, and Odaily Planet Daily will interpret the platform's functions, data, and this phenomenon.

Introduction to Pump.fun

Launched in February 2024, Pump.fun is a one-click issuance platform for Meme tokens. At its launch in February, it did not attract much user attention or usage, but by mid-March, the number of users and usage began to soar.

Operational Process

• Token Creation: Issuers only need to input the token's name, description, and image, and pay about 0.02 SOL to start a token's "fundraising" issuance process.
• In-platform Fundraising: For users, selecting the token they wish to participate in and entering the desired amount to purchase is equivalent to participating in the token issuance fundraising, and they can sell the corresponding shares before the issuance. Pump.fun will charge a 1% fee.
• Price Curve: It is important to note that the price of Pump.fun's tokens before the official launch is not evenly distributed but is calculated based on the Bonding curve. Simply put, the token price will rise as fundraising progresses and fall as sales within the platform decrease.
• Token Issuance: When users purchase enough tokens and the market cap reaches $69,000, Pump.fun will add $12,000 in liquidity to Raydium (Solana's leading DEX) and burn the LP.

How Pump.fun Stands Out

As of May 5, Pump.fun has issued a total of 418,936 tokens, with cumulative revenue reaching $6.9 million. From April 1 to May 1, Pump.fun's revenue amounted to $4.99 million, equivalent to an annualized revenue of about $60 million, and the growth trend shows no signs of decline. So how did Pump.fun achieve this?

Continuation of Fair Narrative

The answer lies in the narrative of "fairness." Since the rise of Meme tokens in 2021, they have flourished on Ethereum and BSC, but issues such as insider trading, rug pulls, and early exits by developers have severely dampened user enthusiasm for Meme tokens. This led to the emergence of a series of launch platforms like Pinksale.

In Solana, the year 2023 and earlier were filled with rug tokens. To avoid excessive losses from rug pulls, many users became "10U warriors," participating in trades with minimal amounts, which hindered the development of various ecosystems.

Pump's automatic LP addition and burn function aligns with users' fundamental needs. Tokens from Pump do not have nominal project parties or managers, thus avoiding issues related to super admin rug pulls.

Meme and Social Attributes

In addition to the token's name, Pump.fun's tokens also require an image and description, along with a comment feature, which endows them with the ability to quickly and intuitively spread their backstory and style.

Previously, Meme tokens, project websites, and official media mostly relied on mutual references to link information. In contrast, Pump.fun effectively completes a one-click aggregation, allowing users to quickly obtain most information while granting the tokens themselves social and effective dissemination capabilities.

A "Harvesting" New Path?

Although born out of the pursuit of "fairness," some mechanisms of Pump.fun have become harvesting tools for certain users. As mentioned earlier, Pump.fun issues tokens extremely quickly, resulting in a large number of new tokens daily, and most users can only judge the quality of projects based on their "social" attributes.

On the other hand, the prices on Pump.fun are not evenly distributed; latecomers often face costs that are five times higher than those of early users. This has led to some malicious users purchasing high-follower accounts to create a false sense of high attention, buying large amounts of tokens at the bottom, and then quickly exiting before the issuance once users are misled by the illusion of high attention. Similarly, some influencers create new tokens using their influence and then leverage extreme price curves to quickly monetize their influence (harvest).

Conclusion

Since the advent of BRC-20, the call for fairness and opposition to high FDV VC tokens has intensified. The surge of PEPE and WIF into the top ten is a primary representation of this trend, and Pump.fun embodies this narrative. It is not difficult to foresee that the concept of fairness will run through this bull market, becoming a trigger point for many disruptive projects.

On the other hand, Pump.fun also holds significant importance for the Solana ecosystem, not only in terms of the $60 million annual revenue but also in the billions to tens of billions of dollars in trading volume behind that revenue, representing considerable growth for DEXs and nodes, and serving as the ultimate tool for attracting users to Solana.