Author: Yue Xiaoyu
Pumpfun is a meme coin issuance and trading platform on the Solana chain, focusing on fair issuance.
Pumpfun was launched in January 2024 and quickly became popular in the community after its launch, catching up with the meme coin craze, or directly pushing the meme coin craze into a new stage.
Pumpfun's data can be said to be very impressive. It has currently accumulated more than 200 million US dollars in revenue. During some peak periods, Pump.fun's daily revenue can reach millions of US dollars, surpassing Uniswap Labs at one point and becoming the fourth largest protocol among all blockchain networks.
If speculating on meme coins is like gambling, then pump is the most profitable casino. It is better to open a casino than to participate in gambling.
Pump is a phenomenal product in this cycle, so it is very straightforward to study and learn from.
01 Team Background
The Pump team didn’t actually start out as a launchpad. Instead, they were initially working on an NFT marketplace, but after several attempts, they switched to their current direction.
Pump is a European team whose founding members are very young. Their CTO did not even go to college and his highest education is secondary school, but he is very technically proficient. Their youth and technical prowess allow them to look at problems in different ways and have a keen intuition about products.
Therefore, the key to the success of the pump project lies in the youth and innovation of their team. In fact, many people have thought of this idea, but only the PUMPFUN team can really make it happen.
The road to success is not crowded because most people cannot persevere.
When you have an idea, there may be a thousand people in the world who already have this idea, but only a hundred people can turn ideas into actions and truly put them into practice, and only a handful of people can persist in doing so and solve one difficulty after another.
Not only in Web3, but also in the Web2 industry and in the development history of various industries, there are already many such cases.
02 How it works
Pump focuses on fair issuance, with no pre-sale and no team allocation. So how is it achieved?
Automated market makers (AMMs) like those used in decentralized exchanges (DEXs) also need to create a liquidity pool and inject initial liquidity, but the bonding curve pricing model (Bonding Curve) used by Pump.fun directly uses the function curve to realize price changes.
Simply put, in the joint curve pricing model, there is a positive exponential upward relationship between the token price and the token quantity. The higher the token price, the more tokens are released.
That is, tokens will gradually enter circulation based on purchases. As users purchase tokens, they will be "minted" or "released".
The bonding curve function will cause the price to increase faster as the token supply increases.
This way, when you buy in the early stages, the token price will not rise very fast, but the later you buy, the more the price can be raised with the same amount of money.
In the early stages of purchase, since the number of tokens in circulation is relatively small, the impact of each purchase on the price is relatively small. That is, the price increase will not be too large.
When the number of tokens in the market already has a considerable base, the number of tokens that can be purchased with the same amount of funds (SOL or other currencies) will decrease, but due to the characteristics of the price function, these purchases will lead to a more significant increase in prices.
What consequences will such functional characteristics bring?
First, it can encourage early investment. Early buyers can acquire tokens at a lower price, and then as the price rises rapidly, the value of the tokens they hold will increase significantly.
Second, late-stage investment has a leverage effect. In the later stages, the same investment amount will have a greater impact on the price due to the characteristics of the price curve, which will have a stronger incentive effect on late entrants and is more in line with the characteristics of meme coins. Unlike some large-cap tokens, when the amount of money invested in the later stages is relatively small, it will not have any impact on the price, which means there is no sense of participation.
Of course, there is an upper limit to the price increase. The pump is set up as follows: when a certain market value is reached, a liquidity pool will be automatically built in the DEX and transferred to the DEX for trading.
That is, the fundraising phase of issuing tokens on pump uses a joint curve function, which provides a price discovery mechanism for the early stages of token issuance.
But without external intervention, prices may rise indefinitely due to excessive speculation. By moving to DEX and using AMM (Automated Market Maker), a natural balancing mechanism of the market can be introduced to avoid excessive price fluctuations.
Building a liquidity pool on DEX can provide a stable trading environment for tokens and alleviate the extreme price fluctuations that may be caused by a single curve model to a certain extent.
When the market capitalization of a token is relatively large, a trading mechanism is needed that can maintain price stability, better market liquidity depth, and avoid very drastic price fluctuations.
03 Overall process
The overall process can be divided into two stages: the fundraising stage before listing and the trading stage after listing.
- Create a token: First, users can issue tokens with one click. Users can create a token at a very low cost (0.02 SOL) without any technical background. The creation process only requires entering the token name, code, introduction and a picture.
- Fundraising stage: The creator attracts other users to buy tokens. All token models on pump.fun are the same, with a constant total of 1 billion, an initial circulation of 0, and an initial "virtual market value" set at 30$SOL. Tokens are released through user purchase behavior.
- Reaching the listing threshold: When the market value reaches $100,000 (denominated in SOL), that is, the amount of funds raised reaches $17,000, and the circulation of tokens is 800 million, Pumpfun will mint another 200 million tokens, which will be combined to form a trading pair and added to the decentralized exchange Raydium, and finally a decentralized Memecoin with a market value of $69,000 and a total token amount of 1 billion will be launched.
- Successful listing: The price of each token listed on Raydium, i.e. the moment the fundraising is completed, is 0.00000041 $SOL, 14.64 times higher than the initial virtual pool price. During the entire process, Pumpfun will charge a 1% transaction fee during the fundraising phase, and a 6SOL listing fee when the token is listed on Raydium.
04 Highlight function: Live broadcast
Recently, the live broadcast function of pump has become very popular. I browsed around and was shocked. There were people doing pornographic live broadcasts, some locking up grandma until the market value reaches a certain level before releasing her, and some squatting on the toilet to hype up the market. They really did everything they could.
When it comes to live streaming of cryptocurrency trading, the first thing that came to my mind was someone live streaming how they traded cryptocurrencies, but I didn’t expect that it has now turned into all kinds of abstract ways of attracting attention, like live streaming selling goods and selling cryptocurrencies.
Attention is a scarce resource.
Meme coin itself is a tool to attract attention.
It attracts people's attention through humor and pop culture elements.
Live streaming further amplifies this appeal through real-time interaction, making viewers more willing to participate and pay attention.
Simply put, Meme tokens are inherently entertaining, and live streaming further amplifies this entertainment. Users can participate in a market similar to a game through live streaming, which is both entertaining and engaging.
More importantly, the "Meme coin + live broadcast = attention economy" model has created a new economic model in the cryptocurrency ecosystem.
Through this combination, Meme Coin creators are able to quickly accumulate a large following, and live streaming provides an opportunity to directly interact with the community, thereby converting this attention into investment and trading in Meme Coins.
Live streaming provides Meme coins with an opportunity for instant promotion and real-time marketing. Creators can communicate directly with users and share token concepts, market analysis, or real-time trading activities.
Pump’s live streaming feature is more than just a technological innovation; it changes the way Meme tokens are marketed, making the issuance and trading of tokens more social and entertaining.
This not only increases user stickiness, but also provides a platform for creators who want to promote Meme tokens through social media influence.
Everything has its pros and cons.
In the live broadcasts of the Web2 industry, various anchors are trying various ways to attract attention and finally make profits through rewards or selling goods.
In the live broadcasts of the Web3 industry's pump, because the platform's supervision is very weak and it is closer to money, the anchors can directly issue and speculate on coins, which may catalyze more abstract and unscrupulous behaviors.
Typically, they will be involved in pornography, gambling and drugs, because behind pornography, gambling and drugs is human nature.
For example, there are already a lot of pornographic anchors now.
It has to be said that the porn industry actually has a very keen sense of smell and is often the fastest to use innovative technologies. For example, after AI became popular, pornographic videos with AI face-changing appeared soon, replacing the faces of celebrities in pornographic videos, satisfying the dirty fantasies of many people.
Pump’s live streaming feature has indeed achieved remarkable results in attracting attention and increasing user engagement, but the lack of a certain review mechanism will cause the platform to become a hotbed of unhealthy content, ultimately backfiring on the platform itself.
Not all traffic is valuable, some is toxic traffic.
At present, pump is condoning the proliferation of these bad contents. Although it can help the platform to become popular in the early stage, if it is not restricted later, it may lead to more vicious negative events, and supervision may have to intervene.
Therefore, Pump needs to find a balance between attracting user attention and maintaining a healthy and compliant platform ecology.
05 Conclusion
The Pump team is very product-oriented and is very innovative in product mechanism design, meeting the market demand for the issuance and hype of meme coins.
More importantly, the live broadcast function of Pump further promoted its popularity. Meme coins + live broadcast = the explosion of attention economy.
Pump is no longer just a phenomenal product in the Crypto industry, it is becoming increasingly popular.
Although meme coins are gambling and pure hype, perhaps this also conforms to the most primitive desires and needs of human nature.
Meme coin is also a unique embodiment of crypto culture and decentralized culture.
The craze for Meme coins is actually telling the market: blockchain technology is so complex and the threshold for Web3 applications is so high, so ordinary users should come to this big casino to experience the thrill of trading and satisfy their desire to get rich quickly.
Meme coin is the most primitive and purest Ponzi scheme, and Pump satisfies the needs of everyone to issue and trade coins.
