What is Pump.fun? Explaining the Solana Memecoin Platform

Pump.fun is a platform where users can create and trade cryptocurrency tokens, specifically memecoins, on the Solana blockchain.

‘Meme coins’ (e.g. DOGE, SHIB, PEPE) are crypto-assets whose value is driven primarily by community interest and online trends. Meme coins can have extreme price volatility, often experiencing rapid and unpredictable price fluctuations within short periods. The value of meme coins can be influenced by social media trends, celebrity endorsements, and other factors unrelated to traditional investment fundamentals.

On pump.fun, users can launch their own tokens easily with minimal technical knowledge. The process involves filling out a form with a token name, ticker, description, and an image.

Tokens created on Pump.fun are tradable immediately after creation through a mechanism called a "bonding curve."

The bonding curve refers to the platform's automatic process of adjusting the token's price based on supply and demand. When enough buyers push the market cap to a certain level, some liquidity is transferred to another decentralised exchange like Raydium, potentially increasing the token’s visibility and value.

What crypto do you need to use Pump.fun?

To use pump.fun, a user primarily needs to have Solana (SOL) in their wallet. You can buy Solana here.

Any transactions or trading within the pump.fun platform would require SOL for gas fees, similar to how Ethereum uses ETH for transactions. You can buy SOL on CoinJar.

Social interaction on Pump.fun

There are some interesting social activities on Pump.fun. This includes live streams where creators can promote their tokens. These streams have been controversial due to the content shared, leading to temporary suspensions of this feature.

The platform also has chats for user interaction without needing external platforms like Telegram. This has led to both innovative community building but of course, as with most new tech, people indulge in bad behaviour and as such, chats have also been temporarily suspended before too.

##Pump.fun controversy

Pump.fun has faced scrutiny from financial regulators, especially with the UK's Financial Conduct Authority, which banned it in the UK. The platform has also been criticised for associations with scams like rug pulls, where creators inflate a token's price before selling off their holdings (market manipulation), leaving other investors with worthless assets.

Despite these issues, Pump.fun has been credited with significantly increasing activity on the Solana network.

How does Pump.fun work?

Pump.fun says that all created tokens trade through a token launching system. Pump.fun say that there's no early sale where the team or insiders can buy tokens at a discount before the public. The creators don't give themselves free tokens, so that theoretically everyone has a fair shot at buying the token from the start.

Step 1: Pick a coin you like

Browse through the tokens available on Pump.fun. Look for ones that might appeal to you either by their name, the image, or the community buzz around them. Remember, these are meme coins, so often the appeal is in the humor or cultural relevance.

Step 2: Buy the coin on the bonding curve

This is a pricing mechanism where the price of the token is expected to increase as more are bought.

When you buy, you're adding liquidity to a pool, which increases the price for the next buyer.

To buy, you'll need a Solana-compatible wallet like Phantom or Solflare, and some SOL (Solana's native cryptocurrency) to purchase tokens.

Step 3: Sell at any time

You can decide to sell your tokens at any point. Just like buying, selling on the bonding curve decreases the price for the next seller because you're removing liquidity from the pool.

If the price goes up after you buy, you can sell for a profit. If it goes down, you might sell at a loss.

Step 4: Reaching a market cap of $100K

As more people buy the token, its total market cap (the total value of all tokens in circulation) grows. Once the market cap reaches $100,000, Pump.fun deposits $17,000 worth of liquidity into Raydium.

Some of these tokens are permanently removed from circulation (called “burning”), which can theoretically increase the value of the remaining tokens by reducing supply.

Fees on pump.fun

Here's a breakdown of the pump.fun fees you'll encounter when using the pump.fun platform.

Creating a coin

There's no cost to make a new coin on pump.fun. It's free (0 SOL).

Buying/selling a coin on the bonding curve

Each time you buy or sell a coin, there's a 1% fee on the total amount you're spending or receiving, and this fee is in SOL.

When your coin moves from pump.fun to Raydium

If your coin becomes popular enough to move to Raydium, there's a fixed fee of 6 SOL. This fee covers both the network costs and Raydium's fees, which can change but are always included in this 6 SOL. This fee comes out of the coin's liquidity, so you don't have to pay it out of your pocket. At the time of writing (11 February 2025) 6 SOL is worth €1,164.06.

A word of caution

As with any crypto platform, especially one dealing with speculative assets like memecoins, there's always a risk. Even with fair launches, there can be scams where creators manipulate the market and then abandon the project. This platform is really, REALLY just for fun, and you can’t expect to make material investment gains from it.

CoinJar is not in any way affiliated with Pump.fun.