Written by: Shenchao TechFlow
Liquidity exhaustion and declining user activity force every project to seek new breakthroughs to attract more users and market share.
For example, yesterday, Pump.fun also announced its brand new decentralized trading platform - PumpSwap.
As the name suggests, swap itself points to the core operation of token exchange in DeFi; as a platform centered around memecoin culture, Pump.fun’s actions have a flavor that expands into a more general DeFi platform.
So what exactly is PumpSwap? Why did Pump.fun choose to launch it at this point in time? Perhaps we can glimpse the clues from its background and motivations.
From growth to control
With its unique “internal and external market mechanism” and memecoin culture, Pump.fun attracted a large number of users and trading volume in a short period during the last cycle.
However, with the development of the platform, the limitations of its existing model are gradually becoming apparent.
The internal and external market mechanism of Pump.fun has brought in a large number of users, but it also poses a significant problem — user experience is constrained by the stability of liquidity.
Limitations of the internal market: The liquidity of the internal market relies entirely on the platform’s own resources. When liquidity is insufficient, the user’s trading experience will be affected.
Dependency on external markets: When the internal market cannot meet user demand, trades will be routed to external markets, which rely on third-party platforms such as Raydium for liquidity. While this model addresses short-term issues, the reliance of Pump.fun on external platforms remains a potential risk in the long run.
Under the current model, Pump.fun needs to pay millions of dollars in transaction fees to external platforms like Raydium each year. These fees not only increase the operating costs of the platform but also mean that a portion of Pump.fun’s profits is taken away by external liquidity providers.
To break free from reliance on external platforms, Pump.fun has previously attempted to build its own AMM pool (amm.pump.fun). Although this is just a test version, with very simple functions and pages, its significance lies in providing a viable alternative for Pump.fun.
Through testing, Pump.fun has proven its full capability to build its own liquidity pool and take complete control of transaction fees.
From the current PumpSwap page, this AMM pool is actually prepared for the Swap product, and the product page and functions are quite similar.
(Reference reading: Did Pump.fun create its own AMM pool? The intention to seize Raydium’s profits is evident.)
Product iterations are more of a surface phenomenon; the deeper reason lies in the control of liquidity.
In the past, Pump.fun was the “traffic provider” for Raydium, bringing in a large volume of transactions; now, Pump.fun seems to want to become the “controller” of liquidity, completely freeing itself from reliance on external platforms.
By creating its own liquidity pool, Pump.fun can not only retain more profits but also lay the foundation for the future launch of more DeFi products (such as perpetual contracts, lending protocols, etc.) and develop more ecological gameplay.
PumpSwap Features Overview
In this context, PumpSwap launched by Pump.fun can be seen as a fully functional decentralized exchange (DEX).
The core goal is to provide users with a more efficient trading experience while promoting the ecosystem towards diversification and sustainable development. As an important strategic upgrade of Pump.fun, PumpSwap is no longer limited to memecoin trading, but instead expands the breadth and depth of its ecosystem by supporting more quality projects and cross-chain assets.
According to the official introduction, its functions and advantages are:
Instant Migration and Zero Fees
PumpSwap has thoroughly optimized the existing token migration process. All tokens that have completed the bonding curve will be migrated directly to PumpSwap without any migration fees.
This improvement has greatly reduced the costs for users and project parties compared to the previous migration fee of 6 SOL.
Higher liquidity and creator revenue sharing
PumpSwap not only provides higher liquidity for tokens but also plans to launch a Creator Revenue Sharing mechanism. This mechanism will allocate a portion of the protocol’s revenue to token creators, incentivizing higher quality projects to launch on PumpSwap while strengthening the alignment of interests between creators and the community.
Create and manage liquidity pools freely
PumpSwap allows users to create their own liquidity pools for free or add funds to existing liquidity pools. This flexibility enables users to manage their assets more conveniently while injecting more liquidity into the ecosystem.
Support diversified asset trading
In addition to memecoins, PumpSwap also supports trading of high-quality tokens in collaboration with it, with many tokens being bridged to Solana for the first time. This feature not only expands the asset range of PumpSwap but also provides users with more trading options.
A fee structure that balances fairness and incentives:
The trading fees of PumpSwap are consistent with mainstream DEXs like Raydium, charging a 0.25% fee per transaction. However, its fee distribution mechanism is more innovative:
0.20% allocated to liquidity providers: This reward mechanism aims to attract more users to invest in the liquidity pool, thereby enhancing the trading depth and stability of the platform.
0.05% allocated to the protocol: This portion of the revenue will be used for further development of the platform and ecosystem construction.
In the future, when the revenue sharing mechanism for creators is launched, the above fee distribution rules will be further optimized to ensure that creators can benefit from it.
The similarities and differences between Pump.fun and PumpSwap.
Although PumpSwap is the native DEX of Pump.fun, there are significant differences and complementarities in their functions and positioning.
Pump.fun’s core positioning is as a tool platform for memecoin culture, helping users create, manage, and promote memecoin projects through simple and easy-to-use tools. Its goal is to lower the threshold for issuing memecoins, allowing more users to participate in the creation and dissemination of memecoins.
In contrast, PumpSwap is more oriented towards ecological infrastructure. As the native DEX of Pump.fun, PumpSwap’s mission is to provide more efficient trading and liquidity solutions for memecoins, while promoting the ecosystem’s expansion into the broader DeFi space through a creator revenue-sharing mechanism and diversified asset support.
The relationship between Pump.fun and PumpSwap can be summarized as “entry and core”:
Pump.fun is the entry point for users to enter the ecosystem, attracting users to participate in the creation and trading of memecoins through tools and community.
PumpSwap is the core of the ecosystem, providing users with more comprehensive services through liquidity integration and trading support, and promoting the sustainable development of the ecosystem.
A more intuitive comparison chart is as follows:
Can it be done?
However, will you now use PumpSwap to exchange tokens individually?
Based on the current market conditions and user situation, the answer is mostly negative; this also means that Pump.fun needs more incentive activities, events, and partnerships for joint marketing to drive users to gradually use their own PumpSwap.
Meme has cooled down, it’s a good thing to look for new income points by doing DEX.
But the future success of PumpSwap depends not only on the functionality design of the product itself, but also on whether the overall market environment is “cooperative.” In simple terms, this project largely has to “rely on the weather.”
Timing is crucial.
If new liquidity enters the market, or a better bull market environment arrives, the trading volume of PumpSwap may experience explosive growth. After all, bull markets always increase people’s interest in memecoins and emerging assets, and PumpSwap’s positioning is just right to accommodate this demand.
Conversely, if the market remains sluggish and users’ speculative enthusiasm drops to freezing point, the development of PumpSwap may also face significant pressure.
In addition, Pump.fun needs to find more differentiated competitive advantages, especially in the Solana ecosystem and even in the broader DeFi space. After all, the competition among DEXs is already very fierce, and relying solely on the popularity of memecoins clearly cannot maintain user stickiness for long.
How to attract more users to stay on the platform long-term through innovative incentive mechanisms, unique product experiences, and even collaborations with other leading projects is a key issue that PumpSwap needs to address.
In general, the future of PumpSwap is a game of “time + environment”: in terms of time, it needs to continuously optimize its products and expand its ecological layout; in terms of environment, it needs to wait for the market heat to rise, ushering in new liquidity and user groups.
Ultimately, whether this platform can truly stand out depends on its ability to seize opportunities when the market warms up and carve out a unique development path.
