PUMP.FUN Protocol: From Bonding Curve Calculation to Profitable Strategy Construction

Source: Gryphsis Academy

Introduction

Bitcoin has laid the foundation for the value of cryptocurrency because it cannot be issued in large quantities. Ethereum has triggered an ICO craze through smart contracts, and Memecoin and Memecoin have attracted massive amounts of funds due to fair distribution. The replacement of new technologies has continuously expanded the audience range of crypto applications; and the differences in the issuance mechanisms of emerging tokens further reflect the changes in the audience's investment value concept.

Unlike old meme coins such as $DOGE $SHIB $FLOKI that try to combine practical applications, the Memecoin market has presented a new format under the leadership of $BOME $SLERF since the beginning of this year. From issuance to trading, there are many innovative applications worth paying attention to in the upstream, midstream and downstream of the Memecoin ecosystem.

PUMP.FUN is a decentralized Memecoin issuance platform. Users only need to provide creativity to publish their own Memecoin at a very low cost (0.02 sol) on the platform with one click; users can also participate in tokens issued by others and witness the process of a Memecoin from scratch to a large-scale out-of-circle.

PUMP.FUN is a phenomenal performance application in the track, which has research value and deserves repeated discussion. The PUMP.FUN Dune dashboard can explain the new business forms of the track from the aspects of platform, user, product behavior, activity, growth trend, etc., which is worth tracking for a long time.

1. Introduction to PUMP.FUN

1.1 A comparison

Let's start with a comparison. In the author's opinion, PUMP.FUN and FRIEND.TECH, which was launched last year, have very similar market performances. First, they attracted attention in the Degen player circle on the chain on a small scale. After going out of the circle on a large scale, the track and platform data showed a spiral upward trend. Both of them quickly occupied a very high market share as industry pioneers, and the real user and protocol revenue increased day by day. Fud, which is never absent from the crypto world, has almost no impact on the ecological status of the two.

From the perspective of product design, the two platforms are similar but still have some differences. Both asset issuances use the PAMM (Primary Automated Market Makers) mechanism to provide convenience to users, but their assets and specific pricing curves are still different.

Take PUMP.FUN as an example (the same is true for FRIEND.TECH), PAMM is divided into two mechanisms: Fund-to-Mint and Burn-to-Withdraw. The former can deposit the user's $SOL into the PAMM smart contract reserve pool, and the smart contract reserve pool will cast an appropriate number of Memecoins based on the current pricing reported by the Bonding Curve and send them to the user; the latter can exit by selling Memecoin to the PAMM smart contract.

Unlike Memecoin on PUMP.FUN, FRIEND.TECH tokens have the characteristics of integer mint and theoretical "unlimited issuance" (social relationship establishment). In addition, FRIEND.TECH assets are tokens representing users' social accounts, while PUMP.FUN is Memecoin issued by users.

The two projects are very different in entering the market and in their subsequent play styles. FRIEND.TECH is backed by the top crypto agency Paradigm, whose investment portfolio includes the NFT market Blur and the Ethereum Layer 2 network Blast, which use Pointsfi user incentives, which are also copied to help FRIEND.TECH retain users. The launch of FRIEND.TECH V2 airdrop tokens and Club Key gameplay triggered a new round of market speculation. PUMP.FUN adheres to the tone of Memecoin's civilian and fair launch, and its investment and financing background is difficult to query. Even though it earns hundreds of thousands of dollars a day, it has not released any token plans and has been low-key in expanding platform functions.

For more in-depth research on FRIEND.TECH, please refer to the previous sharing: Friend Tech — Gryphsis Academy Sharing Session (https://www.youtube.com/watch?v=J-aCleuL-HA).

1.2PUMP.FUN Bonding Curve and Products

Since the project contract is not open source, the products launched by PUMP.FUN only announced the gameplay and charges, and the official did not mention the adopted mechanism and product details. In the research process, it is necessary to build a product model and compare and verify the data. The specific research on PUMP.FUN Bonding Curve is as follows:

(1) Product model construction

Compared with other track tokens, Memecoin focuses on community consensus and group trading sentiment. Generally, the total amount of tokens is large and fully circulated, which can be used in conjunction with different publicity and promotion strategies; the initial price will not be set too high, and the price curve in the early stage is relatively steep, and the price fluctuates violently to attract funds.

PUMP.FUN Products:

1. Users come up with a good idea, first select the Ticker they want to publish on PUMP.FUN, and publish a new Memecoin with one click.

2. Other users on the platform continue to buy and sell Memecoin tokens on the pricing curve.

3. PUMP.FUN then sends the newly created Memecoin to Raydium.

4. The new Memecoin is further out of the circle, and users can trade a new Memecoin created by PUMP.FUN users, funded by other PUMP.FUN users, with a total of 1 billion and an initial market value of $69k (410 $SOL) on Raydium.

Users only need to think of a Ticker, upload a picture, write an introduction, and easily create a Memecoin for a small fee; other users can comment below, and the message board-like function set up by PUMP.FUN also facilitates the establishment of the Memecoin community; click on the user address, and the platform can display the tokens held/created by the user and the objects of attention.

Other users can trade this token, and the token will be sent to Raydium when the transaction reaches the fundraising limit.

（2）Pricing Curve

Unlike the FRIEND.TECH pricing system which only accepts integer input and output, the token pricing system on PUMP.FUN is a smooth curve; unlike the FRIEND.TECH token which is theoretically unlimited, all Memecoins on PUMP.FUN share the same economic model, the total amount of tokens is constant, and users mint some tokens at a reasonable price on the Bonding Curve, and the remaining tokens and the raised funds form the LP pool.

After front-end code parsing, a function call named virtualSolReserves is obtained. The PUMP.FUN pricing system has a pre-virtual pool, the amount of $Sol in the virtual pool is x0, and the total amount of tokens is y0. By collecting data on the amount of $SOL purchased by platform users and the corresponding tokens obtained, and fitting with the x*y=k formula, it is found that the pre-virtual pool is 30 $SOL and 1073000191 tokens, the initial k value is 32190005730, and the price of each token is 0.000000028 $SOL.

The following figure shows the calculation process:

The joint curve pricing function is y=1073000191 - 32190005730/(30+x), x is the amount of $SOL purchased, y is the corresponding number of tokens obtained, and the price of each token can be obtained by derivation.

The following is the function curve, blue is the pricing curve, and red is the price curve. According to the curve, it is consistent with the steep characteristics of the newly issued Memecoin in the early stage.

（3） Case Comparison Analysis

1. Users bought and sold and finally raised 85 $SOL. After the exchange, 800 million Memecoin tokens were obtained, which is in line with reality.

2. The raised funds of 79 $SOL (6 $SOL as listing fee) and an additional 200 million tokens were added to the trading pool as the initial liquidity and sent to Raydium. The final total number of tokens was 1 billion, which is in line with reality.

3. The price of each token on Raydium, i.e. the price at the moment of fundraising completion, was 0.00000041 $SOL, 14.64 times the initial virtual pool price, which is in line with reality.

So far, the product details of PUMP.FUN are clear. Users can spend 0.02 $SOL to publish Memecoin with one click. The initial virtual market value of this Memecoin is 30 $SOL. Other users raise 85 $SOL to obtain 800 million tokens. PUMP.FUN mints 200 million tokens, which are combined to form a trading pair and added to Raydium. Finally, a decentralized Memecoin with a market value of 410 $SOL and a total token amount of 1 billion can be obtained.

During the whole process, PUMP.FUN charges 1% of the platform transaction fee before listing on Raydium, as well as a "currency listing fee" of 6 $SOL during the packaging and listing on Raydium.

2. Why do we need to pay attention to PUMP.FUN

2.1 Why do we need to pay attention to Meme

For people outside the crypto world, Bitcoin has no practical use and only exists for speculation. The soaring price only represents the success of the Meme attribute in communication; for the Ethereum ecosystem under the smart contract, $UNI has no empowerment before the voting mechanism. Like Dogecoin, the investment logic is only based on the recognition of industry pioneers and the consensus of the spread of the crypto spirit.

And after the Meme Season, the Summer of Inscriptions and the Memecoin Pre-sale chain-based money-making craze, crypto users have a unique understanding of Memecoin, which has no utility.

The lack of mainstream narratives, the mismatch of funds in the time dimension, and the continuous pursuit of fair launch by crypto users who invest in Memecoin have continuously strengthened the reflexivity of the Memecoin market. More articles about Meme: Deconstructing memes, why do MEMEs perform well in this cycle? Last November, $ORDI was launched on the top exchanges to start the summer of inscriptions. New assets that emerged in the crypto cycle have injected new narratives into the market. Currently, the number of Bitcoin inscriptions has exceeded 66 million, contributing more than $470 million in fees. The last time the meme coin $GME received market attention was three months ago. The recent activeness of the protagonist of the GME incident on social media has brought stocks and related cryptocurrencies back into the public eye.

$GME on the Solana chain has increased by 30 times, and related concept imitations have emerged on PUMP.FUN, and the popularity has also exploded.

Celebrities choose to issue tokens on PUMP.FUN, and further break the circle by linking up with crypto industry insiders. The token $jenner released by Caitlyn Jenner of the Kardashian family also brought Drama to the crypto world, completing a 160-fold increase in one night, with a maximum market value of 30 million US dollars.

Why pay attention to Meme? Borrowing the definition in the article mentioned above, "Memes spread through imitation; any information that can be copied through imitation can be called a meme." As humans who are essentially repeaters, spreading Memes is a phenomenon and a result, and it is a process in which the evolving gene collection seeks order in disorder.

The reason for paying attention to Memecoin is not only because of the wealth-creating effect of the Memecoin track, but also because many crypto assets themselves have Meme attributes, whether it is Bitcoin, which builds the value foundation of the crypto world, or decentralized tokens issued in combination with smart contracts, or inscription meme coins and celebrity coins launched based on simple logic.

2.2PUMP.FUN business data

The Memecoins that PUMP.FUN users and platforms have passed through will have a copycat effect after market logic verification, and the transaction volume will continue to increase; all information about the tokens will be marked on PUMP.FUN, and the process of hot events being repeatedly mentioned will bring huge profits to the platform.

Compared with the verified and constructed Dune dashboard, we believe that the amplified data results can explain most of the phenomena of the new Memecoin industry established by PUMP.FUN. The Dune data dashboard includes platform users, platform revenue, token creation status, and high-frequency trading activities, which can analyze the platform, users, and products in terms of behavior, activity, and growth trends. Dune Dashboard: PUMP.FUN by Gryphsis Academy

(1) Platform Revenue

According to the Dune data dashboard, the PUMP.FUN platform ushered in its first wave of growth in mid-March. As a player who was not the first to occupy the ecological niche in the track, users were gradually accepted during this period. Several Memecoins selected by the platform also created many stories of wealth creation. $SC, which was launched on March 26, reached a market value of over 100 million in just a few days. Since other Memecoins created by users were in their early stages, they also had different degrees of wealth creation effects. The platform's daily revenue reached 1000 $SOL, and continued to grow.

PUMP.FUN ushered in a period of explosive growth from April to early May. $michi, which was launched on April 8, exceeded 200 million in market value and ignited market sentiment. The narrative of Memecoin switched quickly, and imitations emerged in an endless stream. From national coins brought by the Summer Olympics to religious coins, and then to Trump concept coins, there are probably thousands of Memecoins created and traded every day. The average daily income of the platform exceeded 2000 $SOL.

From mid-May to the end of May, when GME stock soared on May 13, the related Memecoins created by users on PUMP.FUN also created a record of income for the platform, reaching 1.2 million US dollars. After experiencing the attack of former employees, PUMP.FUN ushered in a further breakthrough after a brief decline in popularity. The popularity brought by the Memecoin created by celebrities raised the platform's income to 1 million US dollars again. After breaking the circle, the average daily income reached 700,000 US dollars, and the total income of the platform reached nearly 37 million US dollars.

In addition, on May 16, the wallet account permissions for creating trading pairs on the PUMP.FUN platform were stolen by a former employee, resulting in a large amount of Memecoin being unable to be listed on Raydium after completing fundraising. Users lost up to 2 million US dollars. PUMP.FUN took measures to reduce platform revenue in order to win back users.

(2) User growth

According to Dune data, the number of PUMP.FUN users has been on the rise so far. There have been occasional setbacks, but the popularity brought by users to the platform has never diminished. Before April 16, the number of new users on the platform increased dramatically every day, and nearly 35,000 active users were gathered within a month. The user habits cultivated by the platform products gradually laid the foundation for subsequent retention.

From late April to May, the number of new users on the platform slowed down. After the celebrity effect broke the circle, the number of active users on the platform peaked at 64,378 on May 30. The number of new users will continue to slow down in the future. The platform is likely to usher in the first bottleneck of user growth.

(3) Memecoin products

If the Memecoin issued and traded by each user on PUMP.FUN is regarded as a platform product, the data on platform products can reflect the user's behavior and facilitate the improvement of corresponding problems.

The number of Memecoins created on PUMP.FUN changes with the number of active users. Since the launch of the platform, a total of 862,988 Memecoins have been created, and an average of 15,000 new Memecoins have been added every day since May.

Only 10,707 of them can be launched to Raydium for wider trading, which shows that most of the platform's revenue depends on transaction fees, and the creation of tokens and listing fees account for a small proportion.

At present, PUMP.FUN has not disclosed financing information, and the platform is still in the rising period. Dune data shows that there are many high-frequency transaction addresses, and it is not ruled out that there may be brushing behavior.

The platform has also added a live broadcast function, which displays the issuance and operation of the emerging Memecoin in the form of live broadcast and video, providing a suitable way to break the circle of traffic and funds.

PUMP.FUN also cooperates with @bubblemaps to generate associated bubbles for traders, which can check the association of token holding wallets and whether they will be sniped by Dev's burning token wallets, thereby reducing the possibility of rug. The effect of the new features of the platform still needs to be verified by data, and the constantly changing hype of Memecoin narratives and the launch of new features also reflect the team's ability to adjust in a timely manner.

Overall, the PUMP.FUN platform ignited the market after it was launched. In the absence of institutional endorsement, it met the needs of users through the Bonding Curve mechanism, and the platform also relied on the wealth effect brought by the issuance of Memecoin by users to complete the drainage and publicity.

Subsequently, the Meme narrative switched quickly, and the serious user PVP phenomenon did not affect the data growth structurally. Instead, it continued to break the circle due to several hot events. Later, due to external competition, the platform may usher in a growth bottleneck, but for applications that occupy an advantageous ecological niche, there are only more choices that can be made.

2.3 Comparison of Competitive Products

Compared with other Memecoin Launchpad competitors, PUMP.FUN is more capable of building the underlying value of Memecoin from community consensus and group trading sentiment. The Memecoin launched by the platform has an absolute advantage in market performance. As of June 6, the date of completion of this article, there are 16 tokens on PUMP.FUN with a market value of more than 3 million US dollars, and the market value of $SC tokens is as high as 300 million US dollars.

PUMP.FUN's excellent performance and the weakness of other competitors can be attributed to products and backing ecology, in addition to market reasons.

(1) Unlike other competing products that give users a peaceful and static feeling, the most intuitive feeling when opening the PUMP.FUN website is the jumping numbers and dynamic pictures. The high-saturation design stimulates the user's senses, and the emotions are mobilized as if facing Memecoin transactions. The introduction of the gameplay is only five simple sentences, which is in line with the characteristics of Memecoin transaction users. However, other pages introduce token-related information in great detail, which is convenient for new buyers to form a community consensus. The platform's logo is a small green pill, which seems to be intended to express a healing pill but is addictive. The platform's users can no longer extricate themselves.

(2) Unlike PUMP.FUN, which is backed by the Solana ecosystem, meme.market / werich_ / rugdotfun / Momentum_v1 all chose to develop on the Base chain, while the funds and attention on the Base chain were diverted to FRIEND.TECH and Farcaster. Memecoin has solved the cold start problem with the help of the Socialfi platform, and the market value of $DEGEN and $Friend tokens is large, which can give the two platforms other Memecoin imagination space. In the Memecoin Launchpad track of the Base chain, users have become accustomed to the echo wall built by FRIEND.TECH and Farcaster through the social model, and the funds and traffic have been divided up.

（3）During the attack on PUMP.FUN, DEGEN.FUND launched Solana. Similar Bonding Curve and attempts to use cheaper platform fees did not continue to attract the market and form a sufficient scale. The $IYKYK token, which was hyped as a leading target, also returned to normal after a short-term hype by players on the chain.

3. How to participate in PUMP.FUN

For the new sub-segment of Memecoin Launchpad, PUMP.FUN should be the object of investment research and in-depth participation. We divide the users of the platform into three roles, namely Memecoin Creator, Memecoin Trader, and Memecoin Opportunist. The roles can be fluid, and users will have different opportunities and choices when facing the same Memecoin in the switching of roles.

3.1Memecoin Creator

Memecoin Creator can be a crypto artist, an early evangelist of Memecoin narrative, or a project party that uses the platform for publicity and distribution. Now that it has broken the circle, it can even be a celebrity from all walks of life. As a role that needs to publish/discover new Memecoins worth trading, they need to master certain knowledge of communication and have a certain influence.

A good Memecoin Dev can cooperate with social media to screen out strong Tickers for the market. A Dev who is not very sensitive to the market can also reduce the cost of trial and error with the help of PUMP.FUN. And if you have a special identity like Caitlyn Jenner and Iggy Azalea, the decentralized distribution platform PUMP.FUN can help you save the middle link and bring enough funds and traffic support for your tokens in a very short time.

After screening out good Tickers, Crypto Native crypto artists and Memecoin enthusiasts can use PUMP.FUN to reduce the cost of token issuance.

Early discoverers use cognition and influence to form a new Meme coin narrative for a specific Memecoin platform, and the community established under the narrative has the opportunity to further break the circle.

Celebrities issue tokens on PUMP.FUN, cross-circle interactions and crypto users participate in the Memecoin craze. The last crypto concept that broke the circle was NFT assets. Compared with FRIEND.TECH, celebrity tokens and NFT assets can be used as one of the products of celebrity IP; the tokenization of social relationships will not attract people with certain influence, because their public social resources are very rich, and private social relationships meet their own needs.

3.2Memecoin trader

Memecoin Trader As the most active player on the chain recently, while tracking wallets, using tools, and paying attention to social media, you need to build your own trading strategy to make a profit in a high-risk and high-return game. Compared with other risky assets, traders' profits on Memecoin are more unstable, the winning rate is generally not high, and because of the characteristics of the platform, the trading rhythm is getting faster and faster, which increases the probability of losses.

The experience of Memecoin Trader on PUMP.FUN made the author realize that in addition to the need for continuous improvement of the trading system, the power from the team is very important. Even if the players on the chain are facing huge opportunities, they still need the cooperation of community members, and the community tacit understanding formed by the transaction can eventually return to the consensus of the transaction target. The following is @0xSunNFT and community members review the process of celebrity Iggy Azalea issuing tokens $MOTHER.

3.3Memecoin Opportunist

Whether it is the arbitrage target of scientists on the chain or the high-frequency behavior robot looking for Alpha opportunities, compared with the previous two platform roles, Memecoin Opportunist is the object that smart wallets should focus on. How to choose the right strategy to become a Memecoin Opportunist in PUMP.FUN is worth pondering.

Using the analogy of Texas Hold'em, when the table is hot, you should enter the pot. You can choose a sniper robot strategy to grab the opening when the market is good and the liquidity is sufficient, increase participation and amplify profits; when the table is not so hot or when the market is relatively low or stable, you can choose a reverse sniper strategy to generate income while maintaining market sensitivity.

(1) Memecoin Opportunist Sniper Strategy

Whenever a new Memecoin is launched on PUMP.FUN, the snipe bot will complete the first few buy transactions within a few seconds after screening by indicators. Because the entry position is low enough, the early pricing curve is relatively steep, and the overall market heat of Memecoin continues, this strategy has been able to capture several targets with huge gains in the past few months.

From left to right, $DONALDCAT has a maximum market value of 15 million US dollars, $Japan has a maximum market value of 5 million US dollars, and $Nigi has a maximum market value of 12 million US dollars.

The sniper robot strategy for grabbing the opening needs to be sensitive enough to the market sentiment. Unlike the Solana Sniper Bot that ordinary users may use, there is no contract available for sniping in PUMP.FUN, but the behavior of sniping coins. It is necessary to have a clear monitoring of the interaction between users and the platform on the Solana chain, and be able to isolate the tokens issued by Dev with Rug behavior; after the sniping is completed, set the parameters that can adjust the stop loss or take profit in time, and adjust the sniping funds based on the backtest data.

(2) Memecoin Opportunist Anti-Sniper Strategy

The sniper robot strategy for grabbing the opening is more dependent on the overall market conditions. The model of casting a wide net not only increases opportunities, but also requires funds. Competitors with the same strategy will continue to emerge, further compressing the profit margin. In the process of mutual game, the number of Memecoins that can be generated will gradually decrease. The emergence of the Memecoin Opportunist anti-sniper strategy is precisely to cope with this market change. The specific implementation is as follows:

1. Regularly summarize market hotspots and establish a coin issuance material library

2. Test the sniping behavior of snipe bot and organize the strategies adopted by bot (ticker, amount, time...)

3. Automate the coin issuance process and build an anti-sniping process

4. Adjust parameters to improve capital utilization

Reverse sniping takes advantage of the low-cost coin issuance feature of PUMP.FUN. In the actual process, the reverse sniping strategy with adjusted parameters can bring a single profit ranging from 2% to 20% in a very short time.

The construction of parameters requires analysis of the behavior of the sniper Bot address. The short-term hot imitation disks in the market will continuously trigger the signal of the strategy. Being able to automate the entire process of the anti-sniper strategy is the key to improving the efficiency of capital use and expanding profits. The reverse sniper strategy can achieve low-risk arbitrage, while screening out good Memecoin narratives at low cost, and also win potential future airdrops.

The BSC chain attracts traffic and funds through the Meme-Innovation-Program event to complete the initial layout of the Meme track; the Base chain is currently also launching the Base Onchain Summer event under the leadership of the founder, and Base's Memecoin will definitely receive traffic tilt. The public chain organizes Campaigns to lay out Memecoin and related tracks, while PUMP.FUN, as a unicorn application in the emerging track, is currently only running on Solana. While believing in the PUMP.FUN team and products, the track participation strategy should also consider the hot cycle.

In the author's opinion, the way institutions enter the market is almost certain now. Whether it is a strong acquisition at a low point or participating in the construction as an investor, the leader of the track will return to its due value in both the primary and secondary markets. Therefore, the author believes that the Memecoin Opportunist anti-sniping strategy is the best way to lay out the entire track in advance through PUMP.FUN.

4. Summary

From Ethereum to Solana, from Shiba Inu to Frog, from crypto enthusiasts to celebrity effects, people's pursuit of traffic hotspots never stops. From sloths burning pools to PUMP.FUN's innovation in issuing transactions, people are constantly exploring Memecoin's decentralization and fair mechanisms.

As the leader of the emerging track, PUMP.FUN's extremely low-cost issuance model has completely changed the ecology of Memecoin. The application ecology it has built meets the needs of users and is a unicorn project in the crypto field. As the most Crypto Native narrative application, it has not even released its own platform tokens. What kind of economic flywheel can be formed in the end requires the pioneers of the track to continue to explore.

According to Defillama, the monthly revenue of PUMP.FUN protocol as the Memecoin issuance platform on Solana exceeds Uniswap Labs, becoming the fourth largest protocol among all blockchain networks. Faced with this unicorn application with no additional information disclosure, we need to figure out what it is. Some people think it is a large casino, and some people think it is another platform for PVP in the crypto world where liquidity is exhausted. The author believes that in addition to the above characteristics, it should be a revolutionary product of new crypto assets, which embodies the spirit of decentralization to the extreme in a very low-cost way. Just as Bitcoin rewards early miners and evangelists, why can't Memecoin, which is built on community consensus and trading sentiment, reward users who discover its value through the game process? Is it just because Bitcoin consumes electricity, and PUMP.FUN consumes brainpower and physical strength?

"Don't take the deconstructed things as the final answer to the problem before learning to build." Facing the surging Memecoin reform wave in the crypto MATRIX world, the author will take the green pill of PUMP.FUN with a peaceful mind.

References

[1]https://foresightnews.pro/article/detail/59863 

[2]https://messari.io/report/analyst-discussion-pump-fun 

[3]https://www.theblockbeats.info/news/53703 

[5]https://mp.weixin.qq.com/s/JwqVcjY0ENUFFk9oI79VfQ

[6]https://www.youtube.com/watch?v=losZU4qcs-M&t=4s