This move aims to encourage creators to see their projects through, but its impact on preventing rug pulls remains uncertain.
Pump.fun is introducing a new incentive for meme coin creators to boost the success rate of token launches on its platform. The Solana-based token deployer will now offer 0.5 SOL (approximately $80) to users who complete their token’s “bonding curve” and launch it on the Raydium decentralized exchange (DEX).
In addition to the reward, Pump.fun has eliminated its $2 token launch fee. This cost will now be borne by the first buyer of the token, making it free for creators to initiate new tokens on the platform.
Today we’re introducing 2 HUGE changes to the pump fun mechanism (in beta)
1) Coin creation is FREE
2) Coin creators receive 0.5 SOL (~$80) when their coin completes its bonding curve
How does it work?
1) Instead of the creator having to pay ~$2 for coin creation, this cost… pic.twitter.com/Zp7DCJQoya
— pump.fun (@pumpdotfun) August 9, 2024
However, there are concerns about the effectiveness of this new system in preventing rug pulls. Recent data from August 2 shows that 98.6% of tokens launched on Pump.fun did not complete the bonding curve and failed to list on Raydium. This high failure rate raises questions about whether the reward will be enough to ensure successful token launches.
Understanding the Bonding Curve
A bonding curve is a method used to manage a token’s price and ensure liquidity. Pump.fun employs a bonding curve mechanism to ensure liquidity for newly launched tokens on Raydium. In this system, a fraction of each token purchase is directed into the bonding curve. Once a token’s market cap hits $63,000, the bonding curve is deemed complete, and the token is listed with assured liquidity. This approach aims to keep the token tradable even if its value experiences a substantial decline.
The bonding curve model benefits early buyers, as tokens purchased at an earlier stage are less expensive compared to those bought at higher prices later. While this system supports liquidity and price stability, it does not completely eliminate the risk of rug pulls.
Challenges in Preventing Rug Pulls
The $80 reward aims to encourage creators to follow through with their token launches, but it may not fully address the issue of rug pulls. Traders could still buy tokens early and sell them off before the bonding curve is completed, potentially leading to significant price drops. Additionally, even after a token’s bonding curve is complete, large holders might still dump their positions, affecting the token’s price.
Despite these challenges, Pump.fun has seen significant revenue growth from its 1% trading fee. On July 29, the platform’s daily revenue surpassed that of the Ethereum network, highlighting its influence in the memecoin space.
Launched in January 2024, Pump.fun aims to tackle problems associated with insider token launches by promoting transparency and public access to token data, contrasting with traditional meme coin launches often marred by pre-sales and insider manipulation.
The Solana meme coin sector continues to record significant gains, with many of its token’s price spikes directly being directly correlated to meme coin trading activities.
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