pump.fun Introduces New Reward Structure to Incentivize Memecoin Launches

Solana-based platform pump.fun has introduced a new reward structure for users who launch memecoins.

Solana-based platform pump.fun has introduced a new reward structure for users who launch memecoins on the platform. According to the announcement, users who launch their tokens on the platform and successfully complete the “bonding curve” will now receive a reward of around $80 in Solana. These tokens will then be launched on the decentralized exchange (DEX) Raydium.

Despite this new incentive, there are doubts about its effectiveness in preventing so-called ‘rug pulls’.

Incentivizing token makers

In the announcement, pump.fun explained that the adjustment is intended to further incentivize token creators to fully launch their tokens on the market, without selling them prematurely. At the same, the platform has also reduced the fee for launching tokens from $2 to $0. The $2 fee will now be borne by the first buyer of the token, effectively making it free for creators to launch a new coin on the platform.

These changes follow data from August 2, which showed that 98.6% of all tokens launched on pump.fun never completed the bonding curve process and thus did not launch on Raydium.

Guaranteed liquidity for newly launched tokens

Pump.fun uses a bonding curve model that provides guaranteed liquidity for newly launched tokens once they are traded on Raydium, an automated market maker on the Solana blockchain. This model works by allocating a small amount of each token purchase to the curve. When a token reaches a market cap of $63,000, the bonding curve is complete and the token is launched on Raydium, with guaranteed liquidity.

This model offers advantages to early adopters, as tokens allocated to the bonding curve are initially sold at a lower valuation. While the $80 reward is intended to incentivize token creators, there are concerns that this amount is not enough to prevent rug pulls. Early investors can still dump their tokens before the bonding curve is complete, which users have reported is a common occurrence on the platform.

Some risk remains

Even if a token completes its bonding curve, there is still a risk that large holders will sell their entire position, driving down the price. Despite these challenges, pump.fun has generated significant revenue from the 1% fee it charges on all trades. On July 29, pump.fun’s daily turnover even surpassed that of the Ethereum network, reaching an impressive $864,000 in 24 hours, compared to Ethereum’s $550,000.

Launched in January 2024, Pump.fun positions itself as a transparent and fair solution for memecoin launches, contrasting with historical practices of pre-sales and insider buying that allowed for market manipulation. The platform ensures that all data about launched tokens is public and transparent, giving everyone insight into the number of available tokens and their owners.

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