TLDR:
Memecoins have become one of the biggest focuses in this crypto cycle. Pump.fun succeded in making it simpler than ever to launch and trade a Solana memecoin.
Pump.fun tokens follow a predefined bonding curve that sets the price to supply ratio, and once they reach a $69k market cap they are added to the Raydium DEX.
Both trading and creating memecoins on pump.fun are incredibly trivial as you’ll see below, which is probably why it’s been such a successful platform.
Pump.fun gives the tools for decentralised gambling with memecoins, and its success in doing this means it’s currently making around $1m in revenue per day.
Whether you like it or not, memecoins have become the biggest focus this crypto cycle. And pump.fun has emerged as one of the biggest winners from the memecoin frenzy. So this week I wanted to cover how pump.fun works.
Please note that this is not an endorsement of pump.fun or memecoins. Being an active trader in memecoins is pretty indistinguishable to gambling, the odds are stacked against you so be wary of how much money you put in.
Pump.fun
Memecoins are where a huge chunk of the mindshare is in crypto today. In the previous cycle it was NFTs and in the one before it was ICOs, and this time around it seems pretty clear that memecoins are the focus.
One memecoin influencer on X called Murad shared a video of a talk he gave at the Token2049 event earlier this year in Singapore that’s already got nearly 3 million views on X, and gives a very sincere and compelling case as to why memecoins will continue to be the biggest focus this cycle.
In many ways I agree with Murad’s view as he essentially argues that crypto has always been a token creation industry and that memecoins are the “purest” version of token speculation. For the gamblers in crypto this may be the most important video you can watch right now. I personally don’t recommend gambling, but either way I’d still highly recommend people watch this video and draw their own conclusions.
The truth of the matter is that many people in crypto love to gamble and thanks to the memecoin mania one of the biggest winners this year has been pump.fun, which at its height in August was making over $5m per day in revenue!
Pump.fun is essentially a memecoin token launcher on Solana that’s incredibly simple to use and plays into this “degen” memecoin cycle we’re going through. Just take a look at how simple and “degen” the site is:
Every time a coin gets bought, in other words every other second, it creates an anxiety generating animation that could make an epileptic person genuinely have a fit. The site is as basic and degen as possible, which is pretty much intentional.
The only real purpose of pump.fun is to “pump” out “fun” new memecoins, and let people speculate and gamble on them. So today we’re taking a look at how you can do just this.
How it works
Using pump.fun is super simple and the “how it works” section makes this very clear:
As the instructions explain, you select a coin you like, buy the coin, then keep or sell it whenever you like. If a coin hits a market cap of $69k it will be deposited into the Raydium DEX and removed from pump.fun, having a life of its own outside of pump.fun with more traditional market forces setting the price.
While a coin is in pump.fun it works with a pre-set bonding curve. Bonding curves create a predefined relationship between token supply and price that essentially simulates an exchange. As more tokens are minted or burned the price will move up or down the curve following the predefined mathematical function.
The bonding curve used on pump.fun appears to follow this mathematical function defined as below:
All new coins have a total supply of 800 million, and once they’ve all been minted the coin is moved out of pump.fun and into Raydium.
To reach this market cap of $69k with the bonding curve above, only around $12k of liquidity is needed, so as soon as a total of $12k worth of a token is bought you’ll see it move off pump.fun and onto Raydium.
Buying a coin
To buy and sell a token on pump.fun is super simple. As a quick note first though, pump.fun’s constant shaking is incredibly distracting. I personally recommend you start by turning off the animations, and you can also turn off all the “not safe for work” (nsfw) memes too.
Buying coins is then as simple as connecting your Solana wallet and selecting one of the coins you’re interested in.
On selecting a coin, in this case I selected “AIWIF”, you’ll see the coin’s price history and an exchange like interface where you can buy or sell the token.
To buy you just select how much you want to buy, as you would in any exchange, and then sign with your wallet.
Having bought a token you’ll be able to see the token in your wallet. However, the token’s price won’t show up while it’s still inside the pump.fun system. But if the bonding curve progresses to 100% then the liquidity pool will be created on Raydium and its price will appear in the wallet.
On this page you can also see the top 20 holders in a great little bubble map visualisation, which will give you an idea of how concentrated the tokens are currently held.
Plus there’s also a chat at the bottom of the tokens’ page that you can reply by just connecting your wallet.
Selling the coin follows the same simple interface as buying, and will instantly give you the SOL back at the given price.
Creating a coin
To create a coin is also incredibly simple, you just select “[start a new coin]” at the top and you’re given a small menu asking for:
Name
Ticker
Description
Image
Optional - Twitter, Telegram and Website links
As an example I made a token with an image of a cute goat, since cute animals are always a theme in memecoins.
To create the coin you then simply select “create coin” and decide how much of the coin you want to buy. For the sake of this tutorial I bought 0.25 SOL. Note that pump.fun has some fees so the transaction will cost a bit more than that in the end.
On success it will create a new page for that coin, just as the page above for AIWIF, where you can buy or sell the token just like anyone else.
The key difference of this page as the developer who created the token is that you can also run a livestream with the “create livestream” option. This will literally livestream with your camera on this page so you can try to attract more interest.
For transparency you can also see within the holder distribution that your wallet shows up as the “dev” account.
For every coin you create pump.fun launches a real token on the Solana network that you can even see if you go onto on solscan:
As you can see pump.fun makes the process of launching and speculating on a token incredibly simple!
Be careful!
While it’s fun to make coins and bet on them, don’t ever forget that its essentially gambling. Memecoins are indeed a new form of online gambling, and pump.fun have played into this growing trend by creating a platform that gives the picks and shovels for this decentralised gambling.
The real winner in all of this is therefore pump.fun!
As I said before at their height they hit daily revenues of over $5m, and right now they are still making consistently around $1m in revenue per day as shown below:
Considering how simple the software is, they must have very low running costs and are therefore making incredibly high profits. And just like in a real casino or lottery, the odds are also stacked against you. A report earlier in the year showed the following numbers:
60% lost money.
4.7% made no money.
24% made less than $100.
11.2% made more than $100.
3% made more than $1,000.
0.5% made more than $10,000.
So before you start buying random new coins on pump.fun, be very aware that you’re essentially gambling and the odds are stacked against you, so don’t risk more than you can afford to lose.
If you’re aware of all this though and you’re going to play responsibly, casino’s can be fun - Las Vegas is one of the most visited cities in the world after all.
Just remember that in the end the house always wins.
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Very helpful. Thank you so much.