Satisfying the deepest needs of primitive human nature.
Written by: Yue Xiaoyu
Pumpfun is a meme coin issuance and trading platform on the Solana chain, focusing on fair distribution.
Pumpfun launched in January 2024 and quickly became a sensation in the community, riding the wave of the meme coin craze, or rather, directly pushing the meme coin trend into a new phase.
The data for Pumpfun is quite impressive, having accumulated over $200 million in revenue. During peak periods, Pump.fun's daily revenue can reach millions of dollars, at one point surpassing Uniswap Labs, becoming the fourth largest protocol across all blockchain networks.
If trading meme coins is like gambling, then pump is the most profitable casino. It’s better to run a casino than to gamble.
Pump is a phenomenal product in this cycle, making it very straightforward to study and learn from.
01 Team Background
The Pump team initially did not start as a launchpad; 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 didn't even attend university, with the highest education being high school, yet they possess strong technical skills. Their youth and technical prowess allow them to view problems differently and have a keen intuition for products.
Thus, 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 could 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 have the same thought, but only a hundred can turn that idea into action and truly put in the effort. Among them, only a few can persist and solve one difficulty after another.
This is not just in Web3; in the Web2 industry and across various sectors, there are numerous such cases.
02 Operating Principle
Pump emphasizes fair distribution, with no presales or team allocations. So how is this achieved?
Like the automated market makers (AMM) used in decentralized exchanges (DEX), a liquidity pool needs to be created to inject initial liquidity. However, Pump.fun uses a bonding curve pricing model, which directly implements price changes through a function curve.
In simple terms, in the bonding curve pricing model, there is a positive exponential relationship between the token price and the number of tokens. The higher the token price, the more tokens are released.
This means that tokens gradually enter circulation based on purchases. As users buy tokens, they are "minted" or "released."
The bonding curve function causes the price growth rate to accelerate as the token supply increases.
This allows for a slower price increase during early purchases, but later purchases can raise the price significantly with the same amount of funds.
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 price increase will not be substantial.
When the number of tokens in the market reaches 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 price increase.
What results can such function characteristics bring?
First, it encourages early investment. Early buyers can acquire tokens at a lower price, and as the price rises rapidly, the value of the tokens they hold will increase significantly.
Second, late-stage investments have 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, providing stronger incentives for latecomers, aligning more with the characteristics of meme coins. Unlike some large-cap tokens, where late investments have little impact on the price, this creates a lack of participation.
Of course, the price increase is not without limits. The pump's setting is: When a certain market value is reached, a liquidity pool will automatically be constructed on the DEX, transferring to the DEX for trading.
In other words, the fundraising phase for tokens issued on Pump uses the bonding curve function, providing a price discovery mechanism for the early stages of the token.
However, without external intervention, prices may rise indefinitely due to excessive speculation. By transferring to DEX and using AMM (automated market makers), a natural market balance mechanism can be introduced to avoid excessive price fluctuations.
Building a liquidity pool on DEX can provide a stable trading environment for tokens, alleviating extreme price volatility that a single curve model might bring.
When the market cap of a token is relatively large, a trading mechanism that can maintain price stability is needed, with better market liquidity depth to avoid severe price fluctuations.
03 Overall Process
The overall process can be divided into two stages: the fundraising phase before listing and the trading phase after listing.
(1) Create Token: First, users can create a token with one click, at a very low cost (0.02 SOL), without needing a technical background. The creation process only requires entering the token name, symbol, description, and an image.
(2) 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, an initial circulation of 0, and an initial "virtual market value" set at 30 $SOL, releasing tokens through user purchases.
(3) Reach Listing Threshold: When the market value reaches $100,000 (valued in SOL), meaning the fundraising amount reaches $17,000, the token circulation will be 800 million. Pumpfun will then mint 200 million tokens, forming a trading pair to be added to the decentralized exchange Raydium, ultimately launching a decentralized issued Memecoin with a market value of $69,000 and a total supply of 1 billion.
(4) Successful Listing: Upon launching on Raydium, the price of each token at the moment of fundraising completion is $0.00000041 $SOL, which is 14.64 times the initial virtual pool price. Throughout the process, Pumpfun will charge a 1% transaction fee during the fundraising phase and a listing fee of 6 SOL when the token goes live on Raydium.
04 Highlight Feature: Live Streaming
Recently, Pump's live streaming feature has gone viral. After browsing around, I was truly shocked; there are streams featuring adult content, streams where a grandmother is locked up until a certain market value is reached, and streams where someone sits on the toilet to hype things up—it's simply extreme.
When it comes to live streaming for trading coins, I initially thought of someone streaming their specific trading operations, but I didn't expect it to evolve into various abstract methods to attract attention, similar to live commerce.
Attention is a scarce resource.
Meme coins themselves are tools for attracting attention, drawing people in through humor and elements of popular culture.
Live streaming further amplifies this attraction through real-time interaction, making viewers more willing to participate and engage.
In simple terms, meme tokens inherently possess entertainment value, and live streaming magnifies this entertainment aspect. Users can engage in a market that resembles a game, providing both entertainment and a sense of participation.
More importantly, the model of "Meme Coin + Live Streaming = Attention Economy" creates a new economic model within the cryptocurrency ecosystem.
Through this combination, creators of meme coins can quickly accumulate a large following, and live streaming provides direct opportunities for interaction with the community, converting this attention into investments and trades in meme coins.
Live streaming offers meme coins instant promotion and real-time marketing opportunities. Creators can directly communicate with users, sharing the token's concept, market analysis, or real-time trading activities.
Pump's live streaming feature 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 engagement but also provides a platform for creators who wish to promote meme tokens through social media influence.
Everything has its pros and cons.
In the Web2 industry, various streamers also try to attract attention in various ways, ultimately profiting through tips or product sales.
In the Web3 industry's Pump live streaming, due to the platform's weak constraints and closer proximity to money, streamers can directly issue and trade coins, which may catalyze even more abstract and boundary-less behaviors.
This can lead to typical issues related to adult content, gambling, and drugs, as these are rooted in human nature.
For instance, there are already many adult content streamers.
It must be said that the adult industry has a keen sense of smell, often being the first to adopt innovative technologies. For example, after AI became popular, adult videos featuring AI face-swapping quickly emerged, satisfying many people's sordid fantasies.
Pump's live streaming feature has indeed achieved significant results in attracting attention and increasing user participation, but the lack of a certain review mechanism could turn the platform into a breeding ground for unhealthy content, ultimately backfiring on the platform itself.
Not all traffic is valuable; some are toxic traffic.
Currently, it seems that Pump is indulging in the proliferation of such harmful content. While it may help the platform achieve explosive growth in the early stages, if not restricted later, it could lead to more negative incidents, prompting regulatory intervention.
Therefore, Pump needs to find a balance between attracting user attention and maintaining a healthy, compliant platform ecosystem.
05 Summary
The Pump team is highly product-oriented, and Pump's product mechanism design is very innovative, meeting the market's demand for meme coin issuance and speculation.
More critically, Pump's live streaming feature further propelled its breakout, with meme coins + live streaming = an explosion of the attention economy.
Pump is no longer just a phenomenal product in the crypto industry; it is continuously gaining traction and breaking out.
Although meme coins are gambling and pure speculation, they may also align with the most primitive desires and needs of human nature.
Meme coins are also a unique manifestation 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 can come to this big casino to experience the thrill of trading and satisfy their desire for quick wealth.
Meme coins are the most primitive and purest form of capital, and Pump meets the demand for everyone to issue coins and trade coins.
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