1. Project Introduction

Pump.Fun is a platform dedicated to creating and trading memecoins on the Solana and Blast blockchains.

Since launching in early 2023, Pump.Fun has attracted both veterans and newcomers to the cryptocurrency space with its ease of use. The platform makes it easy for anyone to launch their own meme coins by reducing the technical hurdles required to create new cryptocurrencies.Pump.Fun rewards early investors by using a binding curve mechanism rather than a traditional order book to determine token prices, which rise accordingly as demand increases. In addition, Pump.Fun also supports multiple blockchains and has a low coin creation cost, making experimental projects more cost friendly.

Pump.Fun allows users to quickly react to news events or other social phenomena by creating tokens (sometimes called memecoins or shitcoins). For example, if there is a news story about an earthquake in New York City, users can immediately create tokens related to it on Pump.Fun. This approach is not just news sharing, but also carries an element of financial investment, as people can buy these tokens and potentially profit from market dynamics. Beyond that, Pump.Fun’s innovation is that it directly connects social network activity with financial incentives. Unlike traditional social media, which primarily profits from advertising revenue, Pump.Fun allows users to profit directly by engaging and investing in specific social media posts (i.e., tokens). This mode could dramatically change the way people post and interact as financial rewards become an important factor.

2. Working mechanism

1. Creation and discovery of meme coins

• Users can create their own memecoins by simply selecting an interesting name, stock ticker symbol, and image. The process is quick and straightforward, requiring no complex technical knowledge. These tokens are immediately available for trading.
• Discover New Coins: The platform showcases a variety of newly created modal tokens, which users can browse through and select the ones they are interested in to invest or trade.

2. Trading and investing

• Bonding Curve Purchase: Pump.Fun uses a mechanism called “bonding curve” to set the prices of currencies. When a coin is launched on Pumpfun, 8 billion tokens will be put into the bonding curve, and once these 8 billion tokens are sold out, the curve will automatically transition to the next stage. This means that the price will adjust automatically based on the demand for the currency, with higher demand leading to higher prices.
• Real-time Trading: Users can buy and sell currencies in real-time on the platform. The trading interface is intuitive and supports quick trading operations.

3. Automated Trading Using Telegram Bot

• Automation Tools: For a more efficient trading experience, Pump.Fun recommends using a Telegram bot called Trojan. This bot allows users to automate the setup of buy and sell orders, slippage, etc., speeding up the trading process.

4. Liquidity and Market Mechanisms

• Market Reaching Specific Threshold: When the market value of a memecoins reaches a certain threshold (e.g., $69k), the platform automatically injects a certain amount of liquidity into decentralized exchanges like Raydium and executes a burning mechanism. This helps stabilize the coin price and increase scarcity. Once the coin is on Raydium, it can be publicly traded by anyone holding the contract address.
• Widespread Trading: Once a coin is added to decentralized exchanges, it becomes available for trading to a wider audience.

5. Risk Management and Profit Strategies

• Profit Taking and Risk Control: Pump.Fun allows users to sell their positions at any time to lock in profits or minimize losses. Users need to set reasonable profit targets and follow their own trading plan.

6. Community and Support

• Community Involvement: An active community is vital to the success of Memecoin. Pump.Fun encourages users to check the social media activity of the coins and updates from the developers in order to assess the activity and potential value of the coins.

  1. Core features

1. Simplicity: Creating a new currency on Pump.Fun is extremely simple and fast, and can be easily accessed and used by ordinary users.

2. Real-time trading: The platform supports real-time trading without the need to go through a pre-sale. This allows for better distribution of coins before they go live, increasing market fairness and sustainability.

3.3. Market Potential: With real-time updated market information, users can quickly respond to market movements and invest in potentially high value-added currencies.

4. Project evaluation

4.1 Track analysis

The Pump.Fun project belongs to the Social Trading and Decentralized Finance (DeFi) track in the field of cryptocurrency and blockchain technology. It combines elements of social media and financial technology and focuses on providing a platform where users can easily create, trade and invest in digital currencies (memecoins) based on internet fandom. Here are some projects similar to Pump.Fun that are also exploring the social trading and/or meme coins space:

1. Dogecoin: One of the earliest memecoins, Dogecoin was originally created as an easy alternative to Bitcoin, with its branding and community activity centered around the Shiba Inu dog memes. It is now widely used in micropayment and reward systems.
2. Shiba Inu: Shiba Inu is another token designed to be a “Dogecoin killer”. In addition to providing the usual token trading, it has created a decentralized trading platform called ShibaSwap that facilitates the trading and provision of liquidity for the multiple tokens in its ecosystem.
3. Safemoon: Safemoon is a popular self-reflexive token in the Decentralized Finance (DeFi) space designed to reward long-term holders and punish sellers. It accomplishes this by levying a fee on each transaction and redistributing it to existing holders.

4.2 Project Advantages

4.2.1 Advantages of Early Entry

Pump.Fun offers significant advantages by allowing users to purchase tokens before they are listed on mainstream decentralized exchanges such as Raydium. This early access can be strategically beneficial in several ways:

• Higher Profit Potential: Purchasing tokens from the initial phase on Pump.Fun allows users to enter the market at a lower price, and then profit as the tokens become more widely known and potentially push up in value on broader platforms such as Raydium. This early entry can pay big dividends if the token gains popularity and the price rises.
• First-mover advantage: Being one of the first traders to invest in a particular token allows you to capitalize on price dynamics before the larger market is aware of them, which is especially advantageous in the volatile crypto market, where the timing and speed of entry can dramatically affect investment returns.

4.2.2 Profit recovery

Being able to recoup a portion of profits on Pump.Fun before the token migrates to a larger exchange like Raydium provides another layer of strategic advantage:

• Risk mitigation: by taking a portion of profits in advance, investors can reduce the impact of price volatility that may occur after the listing. This is particularly important in crypto markets where new tokens can experience sharp price fluctuations.
• Capital Efficiency: Early profit recovery allows traders to reallocate resources more efficiently. By securing earnings early, investors can free up capital for investment in other emerging opportunities, maintain liquidity, and potentially increase their overall investment activity.

4.2.3 integrated approach

Combining the options of early entry and early profit recovery creates a powerful trading strategy:

• Optimized Investment Lifecycle: Investors can maximize their participation in the lifecycle of the token by entering early and taking profits before the standard listing, a strategy that may offer less volatility and more predictable returns. This strategic approach utilizes the full potential of the full investment window available on Pump.Fun.
• Elevated Trading Dynamics: This strategy not only provides financial benefits, but also helps create a dynamic trading environment. It encourages active participation and liquidity, which is critical to the health and growth of the Pump.Fun ecosystem.

4.3 Project Considerations

4.3.1 Raydium crash risk

When tokens arrive on the Raydium exchange, there is a very high risk that the price of the tokens may drop rapidly (commonly known as a “dump”) and users may suffer losses if they do not exit at the right time. Such price dips are usually caused by early investors and developers selling their tokens quickly when they are listed.

4.3.2 High Fraud Areas Due to Pump.Fun’s low barrier to entry, the platform has become a hotbed of fraudulent activity. It is estimated that up to 95% of projects may be set up purely to defraud investors. These frauds may include:

• Dev Dump: Project creators (developers) may sell their positions before the tokens are migrated to Raydium, causing the price to plummet. This behavior is hard to detect as it looks like normal trading activity.
• Price Manipulation (Pump.fun Bundle): Developers use multiple wallets to artificially inflate the price and then sell all tokens before reaching Raydium. Be wary of the unusually high number of top holders with large numbers of new wallets.
• Big Buyer and Dump: A developer creates the illusion of a big buyer to attract new investors, then dumps the tokens shortly thereafter. Be especially careful with tokens where a single holder controls more than 10% of the supply.

4.3.3 Warning Signs to Note

• Sudden influx of wallets: a large number of new wallets buying only specific tokens is a major red flag warning.
• Checking developers past projects: it is a bad sign if developers have a history of dumping projects.
• A few wallets holding a large supply: if only a few wallets are holding the majority of the supply of tokens, be wary.
• Reused project names, websites or Twitter accounts: These can be signs of fraud.
• Non-functional links: Broken links are usually a clear sign that the project is not trustworthy.
• Developers Not Updating DEX Screening Site Information: It is usually not a good sign if developers are not willing to pay to update information on decentralized exchange screening sites.

5 Conclusion

In conclusion, Pump.Fun, an innovative cryptocurrency trading platform specializing in the creation and trading of modulo coins, offers users a unique and attractive marketplace environment by combining the interactivity of social media with the financial technology of cryptocurrency. With a low-barrier to participation, Pump.Fun encourages more users to enter the decentralized financial space, exploring and creating digital currencies based on pop culture and internet memes. However, success lies in continued innovation, effective risk management, and maintaining the health of the community. For those seeking novel trading opportunities in a dynamic and ever-changing market, Pump.Fun offers an unparalleled platform, and with proper vigilance and preparation, everyone has the opportunity to succeed in this dynamic market.

Disclaimer:

1. This article is reprinted from [ Chain Tea House], with the original title of “Is There Still a Chance for BTC L2 with Western Background? Inventory Mezo, BOB and Spiderchain”, the copyright belongs to the original author [Tea House Xiao Er Er], if there is any objection to the reprinting, please contact Gate Learn team, and the team will deal with it according to the relevant process as soon as possible. 2.

2. The views and opinions expressed in this article represent the author’s personal views and do not constitute any investment advice.

3. The article is translated by the Gate Learn team in other languages and may not be reproduced, distributed or copied without reference to Gate.io.