What is Pump.fun?

Pump.fun has quickly risen to prominence in the crypto community, especially during the recent Solana meme season. This platform has become the go-to place for early memecoin hunters, thanks to its fair and accessible launch system on Solana. 

Pump[dot]fun has captivated the crypto community by allowing anyone to create and launch instantly tradable new tokens for less than $2 in under a minute. 

Users, referred to as Memelords or Devs, can expect to pay just 0.02 SOL, which is currently about $3.5.

But what exactly is Pump[dot]fun? Let's dive in to find out.

The Rise of Pump.fun

Launched in January 2024, Pump[dot]fun has carved out a unique niche by catering specifically to the memecoin community. 

The platform quickly gained traction due to its promise of fairness and safety, ensuring all tokens are launched without presales or team allocations, minimizing the risk of scams. This commitment to a fair launch has attracted significant attention from the crypto community.

Key Features of Pump.fun

1. Solana and Blast Integration:

Pump[dot]fun primarily operates on the Solana network, leveraging its fast transaction speeds and low fees. 

Recently, Pump[dot]fun extended its support to the Blast network as well. Blast, a relatively new player, offers additional opportunities for token creators and traders. 

2. Bonding Curve Model

Pump[dot]fun introduced a bonding curve model for trading Solana and Blast tokens. 

The bonding curve is a mathematical model that determines the price of a token based on its supply, typically increasing the price as more tokens are purchased. This model dynamically adjusts liquidity based on demand, providing an alternative approach to liquidity provision. 

3.  Instantly Tradeable Tokens:

Unlike traditional token creation processes, Pump[dot]fun lets users launch tradable coins immediately. 

There’s no need to wait for liquidity to accumulate or undergo reviews and submissions.

4. Safety Mechanism Against Rug Pulls:

A rug pull is a common crypto scam where token issuers drain liquidity and effectively pull the rug on holders. Pump[dot]fun claims it prevents rug pulls by ensuring all created tokens are safe. 

Every coin undergoes a fair launch with no presale or team allocation, minimizing the risk of scams and creating a safer trading environment for users.

How Pump.fun Works

On Pump[dot]fun, users, known as "Devs," can become their memecoin architects. The process is straightforward: deployers pick a name, ticker, and JPG image for their token and instantly begin trading on a bonding curve. Users select a token, buy it on the bonding curve, and sell it whenever they like.

When enough users have bought the token and its market capitalization reaches $69,000, $12,000 of liquidity is deposited to the Solana decentralized exchange Raydium and burned.

On Blast, the market cap requirement is $420,000, upon which $30,000 of liquidity is deposited to the Thruster DEX. This burning mechanism ensures fairness and prevents manipulation, maintaining a healthy token ecosystem.

Post-Deployment: What Happens Next?

1. Trading Begins

After launching a token on Pump[dot]fun, it becomes immediately tradable on the platform. 

Users have two main options for trading on Pump[dot]fun:

Telegram Trading Bots:
 

Trading through Telegram bots such as Trojan on Banana Gun Bot on Solana offers superior user experience, speed, and convenience.

Pump[dot]fun Web App:

The platform’s web app also allows for trading, though the Telegram bots are recommended for their enhanced usability.

Users can buy and sell the token based on the bonding curve, which adjusts the price dynamically based on supply and demand.

2. Community Building:

Promoting the token on social media, forums, and other online platforms is crucial to attracting buyers and generating interest. 

Pump[dot]fun itself has a built-in community board where users can connect with potential investors.

3. Burning Mechanism:

As discussed earlier, when a token’s market capitalization reaches certain thresholds (e.g., $69,000), a portion of liquidity is deposited to Raydium and burned. 

Burning ensures fairness and prevents manipulation, maintaining a healthy token ecosystem. Once this happens, the Pump[dot]fun launch is effectively over, with the token now being traded on Raydium.

Success Stories and Challenges

Pump[dot]fun has seen notable successes, with tokens like BaoBaoSol transitioning to Raydium's liquidity pool and other tokens such as Shark Cat (SC) and Hobbes achieving significant valuations of $100 million and $35 million, respectively. 

However, the platform is not without challenges. The low cost of token creation has led to a high incidence of scams, with many tokens created solely for quick profits.

Pump.fun Scams and Red Flags

Common scam types on Pump[dot]fun include:

Simple Dev Dump:

Developers buy a significant share of the token and dump it before reaching Raydium. This simple dev dump can be difficult to spot as it sometimes appears like a legitimate token launch.

Pump[dot]fun Bundle:

The developer uses multiple wallets to artificially inflate prices before dumping. This method involves buying with several wallets at the beginning and then selling before reaching Raydium.

The Big Buyer:

A single large purchase is made to gain dominance before dumping. This scam targets new buyers who fail to check the holders, leading to a rapid price crash.

Red flags to watch for include fresh wallets buying tokens, a history of dumping projects, high percentages of supply held by a few wallets, reused projects or websites, and broken links on the project’s website.

A hack of Pum[dot]fun, which leveraged flash loans to withdraw money from the platform, resulted in the loss of about $2 million on May 16.