Author: Yue Xiaoyu
Pumpfun is a platform for issuing and trading meme coins on the Solana chain, focusing on fair issuance.
Pumpfun launched in January 2024 and quickly gained popularity in the community, catching up with the meme coin craze, or rather, directly pushing the meme coin craze into a new phase.
Pumpfun's data can be described as outstanding, having accumulated over $200 million in revenue. During peak periods, Pump.fun's daily revenue can reach millions of dollars, once surpassing Uniswap Labs, becoming the fourth largest protocol among all blockchain networks.
If trading meme coins is like gambling, then pump is the most profitable casino. It's better to open a casino than to gamble.
Pump is a phenomenal product in this cycle, making it very direct to study and learn.
01 Team Background
The pump team initially was not focused on launchpads; they originally created an NFT marketplace but shifted to their current direction after several attempts.
Pump is a European team, and the founding members are quite young. Their CTO has not even attended university, with the highest education being high school, but he is very technically skilled. Their youth and technical prowess allow them to view problems differently and have a keen intuition for products.
Therefore, the success of the pump project hinges on the youth and innovative capabilities of their team. Many people have thought of this idea, but only the PUMPFUN team can truly execute it.
The road to success is not crowded, because most people cannot persist.
When you have an idea, there may be a thousand people in the world who already have that idea, but only a hundred can turn that idea into action and truly practice it, and only a few persistently solve one difficulty after another.
Not just in Web3, but in various industries throughout the development process, there have already been numerous such cases.
02 Operation Principle
Pump emphasizes fair issuance, with no pre-sale or team allocation, so how is this achieved?
Like the Automated Market Maker (AMM) used on decentralized exchanges (DEX), it also requires creating a liquidity pool to inject initial liquidity. However, the joint curve pricing model used by Pump.fun directly implements price changes through the function curve.
In simple terms, in the joint curve pricing model, there is a positive correlation between token price and token quantity, meaning that the higher the token price, the more tokens are released.
This means that tokens will gradually enter circulation based on purchases. As users purchase tokens, the tokens will be 'minted' or 'released'.
The joint curve function causes the speed of price growth to accelerate as the supply of tokens increases.
This way, it can achieve that the price of tokens does not rise quickly during early purchases, but the later the purchase, the more the same amount of funds can elevate the price.
In the early purchase phase, since the number of tokens in circulation is relatively small, each purchase has a relatively minor impact on the price. In other words, the magnitude of price increase will not be too large.
When the number of tokens has reached a considerable base in the market, the number of tokens that can be purchased with the same amount of funds (SOL or other currencies) will decrease, but due to the nature of the price function, these purchases will lead to a more significant increase in price.
What results can such function characteristics bring?
First, it can encourage early investment. Early buyers can acquire tokens at a lower price, and as the price rises rapidly afterwards, the value of the tokens they hold will significantly increase.
Second, later-stage investments have a leverage effect. In the later stages, the same amount of investment will have a greater impact on prices due to the characteristics of the price curve, providing stronger incentives for later entrants, which aligns more with the characteristics of meme coins. Unlike some large market cap tokens, when the investment amount is relatively small in the later stages, it does not significantly affect the price, leading to a lack of participation.
Of course, the price increase is not without limits; the pump's setting is that when a certain market value is reached, it will automatically build a liquidity pool in the DEX and transfer to DEX for trading.
In other words, the fundraising phase for tokens issued on pump uses a joint curve function, which provides a price discovery mechanism for the early stage of the tokens.
However, without external intervention, prices may rise indefinitely due to excessive speculation. By transitioning to DEX and using AMM (Automated Market Maker), a natural balancing mechanism can be introduced to avoid excessive price fluctuations.
Building a liquidity pool on a DEX can provide a stable trading environment for tokens, alleviating extreme price fluctuations that may arise from a single curve model to some extent.
When the market value of tokens is relatively large, there needs to be a trading mechanism that can maintain price stability, ensuring better market liquidity depth and avoiding extreme price fluctuations.
03 Overall Process
The overall process can be divided into two phases: the pre-listing fundraising phase and the post-listing trading phase.
Creating Tokens: First, users can issue a token with one click, creating a token at an extremely low cost (0.02 SOL) without needing a technical background. The creation process requires only entering the token name, symbol, description, and an image.
Fundraising Phase: Creators attract other users to purchase tokens. All token models on pump.fun are the same, with a total supply fixed at 1 billion, initial circulation at 0, and an initial 'virtual market value' set at 30 $SOL, releasing tokens through user purchases.
Meeting the Listing Threshold: When the market value reaches $100,000 (in SOL), meaning the fundraising amount reaches $17,000, the token circulation will be 800 million, and Pumpfun will mint an additional 200 million tokens, forming a trading pair added to the decentralized exchange Raydium, ultimately listing a decentralized issued Memecoin with a market value of $69,000 and a total supply of 1 billion.
Successful Listing: When it goes live on Raydium, the price per token at the moment of fundraising completion is 0.00000041 $SOL, which is 14.64 times the initial virtual pool price. Throughout this process, Pumpfun will charge a 1% transaction fee during the fundraising phase and a listing fee of 6 SOL when tokens go live on Raydium.
04 Key Features: Live Streaming
Recently, the live streaming feature of pump has exploded; I browsed around and was simply shocked, with various streamers doing pornographic live streams, locking up grandmothers until a certain market value is reached, or continuously squatting on the toilet for hype, truly sparing no effort.
When it comes to live streaming for trading coins, I initially thought of people live streaming how they specifically trade coins, but I didn't expect it to turn into various ways of abstractly attracting attention, similar to live commerce.
Attention is a scarce resource.
Meme coins themselves are tools for attracting attention.
They attract people's attention through humor and elements of popular culture.
Live streaming further amplifies this attraction through real-time interaction, making viewers more willing to participate and pay attention.
In simple terms, Meme tokens inherently have an entertainment nature, and live streaming further amplifies this entertainment. Users can participate in a market similar to a game through live streaming, making it both entertaining and engaging.
More importantly, the model of 'Meme coins + live streaming = attention economy' creates a new economic model in the cryptocurrency ecosystem.
Through this combination, creators of Meme coins can quickly accumulate a large following, and live broadcasts provide an opportunity for direct interaction with the community, transforming this attention into investment and trading in Meme coins.
Live streaming provides Meme coins with instant promotion and real-time marketing opportunities. Creators can directly communicate with users, sharing the concept of the tokens, market analysis, or real-time trading activities.
The live streaming feature of pump is not just a technical 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 wish to promote Meme tokens through social media influence.
Everything has both positive and negative aspects.
In Web2 industry live streams, various hosts are also trying to attract attention in various ways, ultimately profiting from tips or merchandise sales.
In the live streaming of pump in the Web3 industry, due to the platform's weak regulations and being closer to money, streamers can directly issue and trade coins, which may catalyze more abstract and boundary-less behaviors.
Typically, it will be associated with gambling, as gambling is rooted in human nature.
For example, there are already many pornographic streamers.
It must be said that the porn industry has a very keen sense of smell and often utilizes innovative technologies faster than others. For example, after AI became popular, pornographic videos using AI face-swapping quickly emerged, replacing the faces of celebrities in porn videos to satisfy many people's sordid fantasies.
The live streaming feature of pump has indeed achieved significant results in attracting attention and increasing user participation, but a lack of certain review mechanisms could turn the platform into a breeding ground for unhealthy content, ultimately backfiring on the platform itself.
Not all traffic is valuable; some are just toxic traffic.
Currently, it seems that pump is indulging in the proliferation of these unhealthy contents. Although it can help the platform achieve explosive popularity in the early stages, if not restricted later, it may lead to more malicious negative events, and regulation may need to intervene.
Therefore, pump needs to find a balance between attracting user attention and maintaining a healthy, compliant platform ecosystem.
05 Conclusion
The pump team is very product-oriented, and pump is highly innovative in product mechanism design, meeting the market's demand for the issuance and hype of meme coins.
More critically, the live streaming feature of pump further propels its breakout, meme coins + live streaming = explosive attention economy.
Pump is no longer just a phenomenal product in the Crypto industry; it is continuously gaining explosive popularity.
Although meme coins are gambling and pure speculation, this may also cater to the most primitive desires and needs of human nature.
Meme coins are also a unique expression of crypto culture and decentralized culture.
The craze for Meme coins essentially tells the market: blockchain technology is so complex, and the threshold for Web3 applications is so high, so ordinary users, come to this big casino, experience the thrill of trading, and satisfy their desire for quick wealth.
Meme coins are the most primitive and pure form of funding, and Pump meets the demand for everyone to issue coins and trade coins.
