Pump.fun Explained: How This Solana Project Works

Pump.fun is a Solana-based platform that enables users to create and trade meme coins with ease. Since its inception in January 2024, the platform has garnered significant attention within the crypto community, particularly among those interested in meme coins.

As of mid-2024, Pump.fun has facilitated the creation of over 1.6 million meme coins, becoming a popular choice for both casual crypto enthusiasts and serious traders looking to capitalize on the meme coin craze. Additionally, the platform has generated more than $58 million in cumulative revenue. Currently, the platform boasts a significant following, with over 111,000 active users, reflecting its widespread appeal and user engagement​.

Pump.fun platform allows the cost-effective creation of tokens by waiving the need for creators to provide initial liquidity. As a replacement, creators need to make an initial token purchase, which makes them the first holders of their newly minted coin. Therefore, this low barrier to entry makes Pump.fun one of the simplest methods available for releasing tokens in the crypto industry. But how exactly does Pump.fun work and how to get started?

How Pump.fun Works — Create Your Memecoin

Launching and trading a token has never been made easier as Pump.fun simplifies the processes for even non-tech users. Here’s a step-by-step guide on how Pump.fun operates:

Step 1:Connect Your Wallet

• Visit the Pump.fun Website: Navigate to the platform’s homepage.
• Connect a Solana-Compatible Wallet: Use a wallet like Phantom or Solflare to connect to the platform by clicking the wallet connect button at the top-right corner of the homepage.
• Ensure Sufficient Funds: Make sure your wallet has enough SOL tokens to cover the creation fee and any potential transaction costs.

Step 2: Start Creating Your meme coin

• Launch Your Token: Click on the “Start a new coin” button on the platform.
• Enter Token Details: Fill in the required fields for your meme coin, including:
• Name: Choose a catchy and unique name for your meme coin.
• Ticker Symbol: Create a short, memorable ticker symbol (e.g., “DOGE” for Dogecoin).
• Description: Write a brief description of your token.
• Image: Upload an eye-catching image that represents your meme coin.
• Deploy Your Token: Pay the small fee of about 0.02 SOL to officially launch your meme coin on Pump.fun.

Step 3: Engage with the Community

• Promote Your Token: Utilize Pump.fun’s community board and social media channels to promote your meme coin.
• Monitor Performance: Keep track of your token’s performance using Pump.fun’s built-in tools. Analyze price trends, trading volume, and community feedback to make informed decisions about future promotions and strategies.

Step 4: Trading and Managing Your Meme Coin

• Buy and Sell Tokens: Utilize Pump.fun’s bonding curve model to trade your meme coin.
• Achieve Market Cap Milestones: Once your token reaches a market capitalization of $69,000, Pump.fun will automatically deposit $12,000 worth of liquidity into Raydium.
• Pump.fun uses a bonding curve model to determine token prices. The price increases along a predefined curve as more investors buy the tokens. This pricing model ensures fair pricing and liquidity based on real-time demand.

Understanding The Bonding Curve Model Proper

The bonding curve model is central to Pump.fun as it differentiates it from other token platforms. Here’s how it works.

• Price Adjustment: The bonding curve constantly adjusts token prices based on supply and demand. As more users buy a token, the price increases exponentially along the curve.
• Liquidity Provision: When a token reaches a market capitalization of $69,000, Pump.fun deposits $12,000 worth of liquidity into Raydium, a decentralized exchange on Solana.

What Are The Core Features of Pump.fun

Pump.fun offers a range of features designed to simplify creating and trading meme coins, making it accessible to a broader audience beyond developers.

Supported Blockchains

While Pump.fun primarily operates on the Solana network, it has also integrated support for other blockchains, such as Ethereum’s Layer 2 (L2) Networks, Base and Blast. This multi-network support enhances the platform’s appeal and accessibility to a broader crypto community.

Low Fees

Pump.fun is cost-effective with a competitive fee structure that facilitates the creation and trading of meme coins on its platform:

• Token Creation Fee: Users can create their own meme coins on Pump.fun for approximately 0.02 SOL, roughly equivalent to $3.
• Transaction Fees: Pump.fun charges a 1% fee on all transactions conducted on the platform. This fee is relatively low compared to other platforms, helping to keep trading costs manageable for users.

Safeguards Against Market Manipulation

Pump.fun includes many features to protect users against scams, such as rug pulls. Tokens launched on Pump.fun pass has no presales or team allocations, minimizing the risk of early insiders dumping their tokens on investors.

Additionally, Pump.fun burning mechanism maintains a healthy token ecosystem and reduces the likelihood of market manipulation. Also, when a token’s marketcap reaches a certain milestone, a portion of liquidity is deposited into DEXs like Raydium and then burned. This mechanism enhances market stability and trust in the token’s value.

What Are the Community Engagement Tools Available on Pump.fun?

Community members participate in creating, trading, and promoting meme coins. Pump.fun includes several features that improve engagement and support newly launched tokens. Some of these tools are:

• Community Board: A built-in community board allows users to connect with potential investors and promote their tokens.
• Social Media Integration: The platform encourages users to capitalize on social media channels to promote their tokens and attract a broader audience.

What are the New Creator Rewards Programs?

A series of incentives are available on Pump.fun as a new creator rewards program, which are:

Benefits for Creators

• Financial Incentives: Creators earn rewards based on the performance and popularity of their tokens. The more successful a token becomes, the greater the rewards for its creator.
• Increased Visibility: The rewards program also provides creators with increased visibility within the platform, helping them reach a wider audience and attract more investors.

Recent Security Challenges

Despite these safeguards, Pump.fun has faced significant security challenges.

1. In May 2024, Pump.fun was exploited by a former employee who manipulated the platform’s bonding curves, resulting in a loss of approximately $2 million. This incident Highlights the potential vulnerabilities in Pump.fun’s closed-source code and closed APIs, which limit external audits and scrutiny.

2. Closed-Source Limitations: Operating with closed-source code and APIs, Pump.fun lacks transparency, making it harder for independent security experts to detect and address flaws before they are exploited.

What are the Popular meme coins Launch on Pump.fun?

Since its launch, Pump.fun has been the birthplace of several successful memecoins. Here are some notable examples:

Shark Cat (SC)

Shark Cat is arguably the most notable tokens launched on Pump.fun as it quickly gained traction to reach a market capitalization of $100 million. The token’s value surged rapidly, driven by a dedicated community and active promotion on social media platforms.

Hobbes

Named after the cat of a popular Solana trader, Hobbes is another success story from Pump.fun. The token achieved a market capitalization of $35 million. Hobbes also benefited from active community engagement and meme coins’ viral nature.

Celebrity-Backed Tokens

The platform has also seen several celebrity-backed tokens launched. Notable examples include Caitlyn Jenner’s JENNER token and Iggy Azalea’s Mother Iggy (MOTHER) token, which capitalized on celebrity endorsements to gain traction.

Conclusion

Pump.fun is a user-friendly platform for launching and trading meme coins, making it a popular choice for crypto enthusiasts and investors. The creation processes are straightforward, and the dynamic pricing model and vibrant community make Pump.fun a robust ecosystem for meme coins.