No-threshold casino Pump.fun understands how to leverage human nature best

Author: Jessy, Golden Finance

On August 13, the daily revenue of the Memecoin launch platform Pump.fun on Solana reached a new high of $5.33 million. In July, its cumulative protocol revenue reached $28.73 million, setting a monthly record. As of August 13, Pump.fun's cumulative revenue exceeded $94 million.

Pump.fun was launched in February 2024, and by mid-March, the number of users and usage began to soar. Within just six months, it achieved multiple days of revenue surpassing that of Ethereum.

This inevitably leads one to marvel that, in the crypto world, the most profitable business is still the "casino."

Recently, Pump.fun launched a promotion allowing users to create tokens without any fees. Coupled with the fact that most users are currently losing money, there are numerous copycat projects emerging. Voices within the community expressing skepticism about Pump.fun have also increased.

Will a purely casino-like platform disappear? And what significance do such projects hold for the industry?

No-threshold Token Launch Platform

Creating a Memecoin on Pump.fun is very simple; you just need to come up with an eye-catching name and an attractive image, then click the "Start Creating Currency" button at the top of the homepage. Users can write a brief description of the currency and provide links to relevant social media channels, then pay 0.02 Sol to deploy their memecoin.

In the industry, innovations in token issuance methods have always driven new narratives. For example, the Ordinary protocol, which became popular last year, innovated the way new assets are issued on Bitcoin, sparking interest in the Bitcoin ecosystem. Looking further back, the ICO boom in 2017 triggered the blockchain bull market.

Fundamentally, one of the important innovations of blockchain itself lies in token issuance and the establishment of project economic models.

Pump.fun actually integrates the ICO issuance method. It adopts a pre-sale fundraising model, allowing users to choose the tokens they want to participate in, then input the quantity they wish to purchase, which is equivalent to participating in the token issuance fundraising. Users can also sell corresponding shares before the issuance, with Pump.fun charging a 1% fee.

Why has Pump.fun been successful? The core reason may lie in its simplification of the token issuance process and the user experience for participating in projects, buying, and selling. Essentially, it has built a project-rich platform with a low entry barrier, akin to a casino.

In terms of operational mechanics, initially, tokens created on Pump.fun can only be traded within the platform. When a token reaches a certain market value (around $60,000), the Pump.fun website will automatically close trading and migrate the token to the Solana DEX Raydium.

At this point, it becomes the time for most people to sell their tokens. Once buyers flood in from Raydium to purchase tokens, users who bought low-priced tokens during the low-value phase on Pump.fun can sell them for substantial profits.

In the industry, the term "graduation rate" is used to describe the success rate of Memecoins issued on Pump.fun going live on DEX.

According to Dune Analytics, the success rate of tokens created on Pump.fun successfully landing on Raydium is 1.41%. Since May, this rate has fluctuated between 1.21% and 1.41%. This indicates that the vast majority of these Memecoins have failed to list on exchanges, making the probability of success extremely low.

The low "graduation rate" of projects on Pump.fun shows that while there are many projects available for users to choose from and "gamble" on, the "odds" are also quite large; selecting a good project relies entirely on luck. Moreover, Memecoins themselves lack fundamentals and purely rely on attention economics, chasing trends.

However, like BRC-20, it has also achieved fair launch, which is one reason users are willing to engage with it.

Scams Abound, but Gamblers Persist

Although Pump.fun touts the gimmick of fair launch, there is never absolute fairness. For project teams issuing tokens on Pump.fun, there are still ways to "harvest" users. In a completely free market with no regulation or constraints, the jungle law is enforced even more thoroughly.

Like any project in the crypto space, project teams or whales can still hold large amounts of tokens at very low prices. The method is simple: create several new wallets, buy in early, continuously make small purchases to drive up the token price, and then use marketing strategies like buying followers on Twitter to increase project visibility, attracting a large number of users to take over, after which the project team can sell at the right time. This method of "cutting leeks" is a common practice in the industry.

The problem with Pump.fun is that anyone can issue tokens on the platform, and the cost of issuing tokens is extremely low. Statistics show that over 1.2 million projects have been issued on the platform. With so many projects available and a large user base, the reach of scam projects has greatly increased.

Additionally, on August 9, the Pump.fun team announced on the X platform that they would reduce the token issuance fee from $2 to $0, and would also reward Memecoin projects that completed the "bonding curve" and listed on Raydium with 0.5 Solana.

The team hopes that such incentives will encourage creators not to completely sell their tokens. From a project management perspective, this "free" policy may be a response to the current proliferation of copycat projects across various chains.

However, the actual impact of this measure is to further lower the threshold for issuing tokens, leading to more scam projects. Moreover, Pump.fun itself lacks a screening mechanism for projects.

For users, coming to Pump.fun is inherently about gambling; speculating on Memecoins is a hope to "turn a bicycle into a motorcycle," engaging in high-risk, high-reward behavior.

Compared to playing Memecoins solo on-chain, the user experience on Pump.fun is actually better, especially since it incorporates social attributes into Memecoin trading. Users can enjoy various funny memes while trading, and can comment and reply on projects, enhancing the fun of the gambling products and the platform.

Recently, there has indeed been a lot of negative commentary regarding Pump.fun, generally describing it as a slaughterhouse-style harvesting, suggesting that once the profit-making effect diminishes, users will withdraw, leading to project decline.

However, most people who go to casinos lose money, yet they continue to flock there. For this reason, Pump.fun is unlikely to disappear; rather, it will thrive even more, especially during this period when Memecoins have become a significant narrative.

What is the significance of Pump.fun for the industry? One clear outcome is that it has greatly increased the activity on the Solana chain. More than that? Which casino was founded to contribute to society!