‍What is Pump Fun

Pump.fun is a platform on the Solana blockchain where anyone can easily create their own coins without technical expertise. Everyone can create tokens, by connecting a Solana wallet, for a small fee (about 0.02 SOL), customizing the coin’s name, symbol, and image. It uses a bonding curve model, meaning the price of your token increases as more people buy it. Pump.fun focuses on simplicity, low fees, and community-driven engagement.

How to launch a token on Pump.fun:

1. Connect Your Wallet: Use a Solana-compatible wallet like Phantom or Solflare with enough SOL to cover the fee (~0.02 SOL).
2. Create Your Memecoin: Choose a name, ticker, description, and image. 
3. Optional: Add social links (Twitter, Website, Telegram).
4. Launch: Pay the fee and mint your token. Once the bonding curve is complete, you receive 0.5 SOL.

How to buy a token on Pump.fun:

1. Pick a coin you like.
2. Buy it on the bonding curve.
3. Sell anytime to lock in profits or losses.
4. Once the market cap hits $69k, $12k of liquidity is deposited and burned.

Where does liquidity come from?

Liquidity is generated from user activity on the platform. Once the market cap hits $69,000, Pump.fun deposits $12,000 worth of liquidity into Raydium (a decentralized exchange), this ensures liquidity is based on real demand rather than external funding.‍

The bonding curve model:

This dynamic pricing model means token prices increase as demand grows. Early buyers get lower prices, while later buyers pay more.

How much cheaper do early buyers pay compared to late buyers?

Token prices change exponentially based on a formula linked to the market cap. Sample formula that can be used to replicate/estimate the price is

Equation: y=0.6015*e^(0.00003606*x)

Where:

• Y is the price per 10 million tokens (step here is assumed as 10M).
• X is the market cap.

How is the $69,000 Market Cap Created and Where Does the $12,000 Liquidity Come From?

Market Cap Creation: The $69,000 market cap comes from selling tokens when a new coin is launched on Pump.fun. During the launch, 800 million tokens are made available. As people buy these tokens, the market cap grows based on how many tokens are sold and their price.

Liquidity Provision: The $12,000 for liquidity is provided by Pump.fun. Once the market cap hits $69,000, Pump.fun adds this amount to decentralized exchanges like Raydium. This extra liquidity helps ensure there are enough tokens for people to buy and sell, making trading smoother and more stable.

The funds for this liquidity provision are sourced from the bonding curve round and specific token allocations designated for liquidity purposes.

How does buy and sale work during the bonding curve?

The bonding curve functions like an automated market maker (AMM) on a decentralized exchange (DEX). Here’s how the buying and selling process works:

1. Purchasing Tokens: When a buyer purchases tokens from the bonding curve, the price is determined by the curve's formula, which reflects current supply and demand.
2. Selling Tokens: After acquiring tokens, buyers can sell them back to the bonding curve at any time before migrating to the Raydium pool. This allows them to redeem their tokens for a price based on the curve's current value.
3. Liquidity Mechanism: When tokens are sold back, they re-enter the liquidity pool, making them available for new buyers. The price at which tokens can be sold back is dictated by the bonding curve, ensuring it aligns with current market conditions.
4. Stability and Trading: The bonding curve maintains liquidity by providing a straightforward mechanism for buyers to sell their tokens back into the system. This helps stabilize prices and facilitates trading.

Safety Measures:

• No Presales or Team Allocations: All tokens have a fair launch with no insider allocations.
• Bonding Curve Stability: Prices increase gradually, preventing manipulation.
• Burn Mechanism: Liquidity is burned at milestones, reducing risks.

Tips to Stay Safe:

• Do Your Research: Understand the project before jumping into trends.
• Check Community Engagement: Legitimate projects have active social channels.
• Monitor Liquidity: Liquidity is locked or follows the platform's milestones.
• Be Wary of Hype: Don’t fall for FOMO or social media pressure.
• Verify Token Source: Research creators and avoid anonymous projects without community engagement.
• Use Secure Wallets: Stick to trusted wallets, such as Phantom or Solflare, and stay vigilant against phishing attempts.
• Closed Source Risks: Pump.fun’s closed-source code means vulnerabilities could be hidden.
• Stay Cautious Despite Safeguards: Be mindful of risks, even with Pump.fun's safety measures like fair launches and bonding curves.

Social media:

Pump.fun Support I X I Telegram