Will PumpSwap Save pump.fun’s Flailing Activity?

Desperate to recapture activity and cut ties with Raydium, pump.fun has finally launched its eagerly anticipated AMM platform. 

Alongside bringing its token migration and liquidity deployment process in-house, pump.fun’s newest product aims to solve some of the meme economy’s biggest challenges.

PumpSwap may align creators with their communities, but is it too late for memecoins to return to their former glory?

PumpSwap Reinvents the Memecoin Game

Pump.fun, crypto’s most viral application, has finally launched the biggest update in its lifespan, Pumpswap. The PumpSwap AMM is set to reimagine Solana’s onchain markets, introducing a wealth of new features and destabilizing Solana DeFi’s status quo.

Instead of migrating successful tokens to Raydium, pump.fun assets that fulfill their bonding curve will be deployed in liquidity pools directly to PumpSwap. Bringing liquidity deployment in-house bears two significant benefits for pump.fun:

• Instant migrations from pump.fun to PumpSwap help graduating coins maintain momentum and gives traders a more seamless experience. 

• Pump.fun will now earn ongoing revenue from Pumpswap protocol fees. Previously, all graduated tokens were deployed on Raydium, which constituted 43.5% of Raydium’s volume and generated the DEX millions from trading fees on pump.fun-launched coins.

The PumpSwap launch introduces a new fee structure for the app. Under the new system, pump.fun abolishes the existing 6 $SOL migration fee in favor of a 0.25% trading fee.

However, the biggest change to pump.fun’s model involves an upcoming revenue share model. In the past, the only way creators could realize profits was by dumping their coins on buyers, a dynamic that encouraged a culture of abundant, short-lived token launches. 

PumpSwap’s upcoming revenue share model flips this mechanic on its head. With token deployers earning ongoing revenue on every trade, creators will be more incentivized to align with token’s growth long-term. Details surrounding the exact mechanics of PumpSwap’s revenue share model are yet to be announced.

Solana’s Most Bitter Onchain Rivalry

Once the twin titans of Solana’s memecoin market, pump.fun and Raydium have turned against each other in a fierce battle of attrition. Courtesy of pump.fun’s former token migration mechanic, Raydium has benefitted enormously from the token launcher’s viral success.

Bouyed by pump.fun’s growth, Raydium reclaimed dominance of Solana’s DEX market share in March 2024. However, given that pump.fun coins represent roughly 43.5% of Raydium’s volume, PumpSwap’s launch represents a significant threat to Raydium’s dominance. 

This fear is reflected in markets, with $RAY dropping around 57% since PumpSwap testing was discovered on February 24.

Despite the fear permeating markets, Raydium is putting on a brave front. Raydium contributor 0xInfra is unfazed by pump.fun’s foray into the AMM sector, suggesting Raydium will continue to thrive despite growing competition.Meanwhile, Raydium’s other representatives have struck out at pump.fun’s new fee model.

Earlier this week, Raydium announced its newest product LaunchLabs, a versatile token deployment platform. While 0xInfra declared that LaunchLabs was not an attempt to siphon users from pump.fun, the Solana community at large considered Raydium’s upcoming app a direct pump.fun competitor.

Raydium has continually expanded its product suite all year, starting with the launch of its beta perps trading platform in January. Raydium perps is currently Solana’s third-largest perpetual DEX, witnessing around $130M in weekly trading volume.

Are the Trenches Cooked?

While Pump.fun’s update has been met with widespread enthusiasm, the changes may have come too late. Solana’s meme economy is languishing, with memecoin volumes and token launches plummeting as traders steadily lose their appetite for risk.

Fierce competition between Raydium, pump.fun, and other decentralized exchanges is starkly reminiscent of Solana NFT economy in 2022-2023. 

Amidst floundering trade volumes and activity, marketplaces steadily cut trading and royalty fees to attract and retain users. Ultimately, this behavior kickstarted a race to the bottom, signaling the beginning of the Solana NFT economy’s great decline.

While rising tensions and intense rivalries between trading platforms hardly guarantee the end of the memecoin meta, it certainly bears similarities to the final days of Solana’s great NFT season.

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