The Tokenomics of Pump.fun

A deep dive into how Pump.fun's bonding curve model works — from token creation to DEX graduation.

What is Pump.fun?

Pump.fun is a Solana-based marketplace for creating and trading memecoins — cryptocurrencies originating from internet memes or trends, with little utility beyond trading. The high-risk, high-reward nature of memecoins (think Dogecoin, originally a joke about Bitcoin) drives speculative demand.

Launched in January 2024, Pump.fun gained rapid traction:

• Over $2.5B in trading volume within its first two weeks
• Over $571M in revenue generated within a year through fees
• Consistently representing 57%+ of all Solana DEX transactions monthly since August 2024

---

How It Works: The Token Lifecycle

1. Token Creation

A user pays a creation fee of 0.02 SOL to launch a new memecoin.

2. Token Launch

800 million tokens are placed into a bonding curve. The goal is to sell off all 800 million through the curve.

Pump.fun uses a constant product rule (x * y = k) for pricing, where price is a function of supply.

3. What is a Bonding Curve?

A bonding curve is a mathematical function that defines token price based on circulating supply:

• As more tokens are purchased, they are minted (created) → supply rises → price rises
• As tokens are sold, they are burned (destroyed) → supply falls → price falls
• The area under the curve represents the Total Value Locked (TVL) into the bonding curve contract

This enables continuous liquidity without a traditional order book — tokens can always be bought or sold at a price determined by the curve.

Pump.fun's Pricing Formula

Pump.fun's system starts with a pre-virtual pool of 30 SOL and 1,073,000,191 tokens. The joint curve pricing function is:

Tokens obtained, y = 1073000191 − (32190005730 / (30 + x))

Where x is the SOL purchased.

4. Transition Event

Once a token reaches a market cap of:

• $69k on Solana, or
• $420k on Blast

...the project must raise 85 SOL to graduate. At this point:

• The bonding curve stops minting new tokens, capping supply
• The creator receives 0.5 SOL as an incentive

5. Migration

Pump.fun migrates liquidity from its internal bonding curve to the Raydium DEX:

• Deposits $12k worth of liquidity (SOL + the memecoin) into Raydium
• Mints Liquidity Provider (LP) tokens representing ownership of that liquidity

6. Liquidity Locking

The LP tokens are burned, permanently locking the liquidity. This is the anti-rug-pull mechanism — Pump.fun issues a receipt for the $12k deposited, then destroys it, so the creator cannot claim or withdraw those funds.

7. Trading

The token is now freely tradable on Raydium against SOL or other paired assets. Price discovery moves from the bonding curve to free-market supply and demand. Large holders can still dump, but the locked liquidity prevents total collapse.

---

Revenue Model

Pump.fun earns through:

• 1% swap fee on all trades on the platform
• Listing fees when tokens graduate to Raydium — 6 SOL out of the 85 SOL raised goes to Pump.fun

---

What Made Pump.fun Special?

1. Ease of token creation — automated smart contract deployment and liquidity setup at low cost reduced barriers to entry and made onboarding seamless

2. Innovative tokenomics — bonding curves rewarded early adopters while ensuring fair, transparent pricing, giving users incentive to participate early and kickstarting the marketplace flywheel

3. Anti-rug-pull measures — liquidity locking built trust in a space notorious for scams, solving a major pain point for memecoin traders

---

Originally published as a whitepaper by @Brendan_In_Byte