The ongoing frenzy over memecoins created on top blockchains over the past year has found a notable competitor in the Solana-based marketplace Pump.fun, a crypto project reminiscent of the anonymous social media platform on the Ethereum blockchain 4chan.
Over One Million Memecoins Created In 7 Months
According to a Bloomberg report, since its launch in January 2024, Pump.fun has witnessed the creation of more than one million memecoins on the Solana and Blast blockchains, establishing itself as the go-to platform for retail investors to create and trade these tokens.
However, the report notes that Pump.fun has faced criticism for perpetuating the perception of crypto as a “gambling arena.” Bloomberg reported that the “well-known” issue of “pump-and-dump” schemes in the crypto space has raised concerns about the integrity of the tokens created in the marketplace.
While Pump.fun has attracted the attention of retail investors and even celebrities like rapper Iggy Azalea, who launched her token called Mother Iggy (MOTHER) on the platform, the report suggests that skeptics argue that Pump.fun allegedly reinforces the perception of crypto as a “speculative casino,” diverting attention from the technology’s true potential.
Critics of tokens issued on the platform also emphasize that these coins often lack utility beyond their meme status, potentially undermining the credibility of the broader crypto industry.
SEC’s Crackdown Fueling Preference For Memecoins?
Rachel Lin, CEO of decentralized derivative exchange SynFutures, observes that Pump.fun’s success reflects the “increased appetite” among retail investors for memecoins.
SynFutures’ CEO believes that many retail investors, tired of traditional venture-backed token investments, find memecoins appealing because of their perceived transparency and potential for high returns, stemming from the notion that VC projects favor the interests of venture capitalists and the projects themselves, leading investors to seek alternative avenues.
The rise of memecoins can also be attributed partly to the US Securities and Exchange Commission’s (SEC) approach to regulating crypto markets and its recent crackdown on the industry, influencing retail investors’ preference for memecoins.
Michael Selig, a partner at law firm Willkie Farr & Gallagher LLP, explains that memecoins stand in stark contrast to securities, which has led investors to buy memecoins primarily to express opinions, participate in communities, speculate on the attention value of cat pictures, or for entertainment.
Pump.fun In A Nutshell
Pump.fun aims to provide a rapid and cost-effective means for anyone to launch memecoins while allegedly mitigating the risks associated with rug pulls.
The project’s anonymous co-founder, Alon, shared during a podcast interview in March that Pump.fun allows users to financially share “funny content” with friends by granting them a stake in the meme’s success.
To achieve this, Pump.fun utilizes an automated process wherein users can upload their favorite memes or JPEGs, a commonly used method of lossy compression for digital images, along with a name and ticker for the token, resulting in the instant creation of a token for a minimal fee of less than $2.
The platform employs a mathematical model to determine the price of memecoins, which increases as more users purchase the token. Notably, new tokens on Pump.fun are created through a fair launch method, issuing all tokens at once without presales, often at a fraction of a cent.
At the time of writing, Solana price stands at $138, indicating no changes to Thursday’s price, as the token has been in a consolidation range between $131 and $144 for the past week.
Featured image from DALL-E, chart from TradingView.com
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