Pump.fun, a Solana-based token launchpad, has been operating under a unique model where all revenue generated was used to buy back and burn its native token, PUMP. Theoretically, this approach was designed to support the token's price by consistently reducing its supply.
However, after reviewing the outcomes of this strategy over the past nine months, the company has decided to alter its course. Going forward, Pump.fun will adopt a 50/50 revenue split.
Half of the net revenue from its core products - the Pump.fun bonding curve, PumpSwap, and Terminal - will be allocated to an irreversible smart contract that automatically buys PUMP tokens on the open market and burns them. The remaining half will be retained by the company to fund product development, hiring, marketing efforts, and potential acquisitions.
This shift marks a significant change from the previous policy, where 100% of revenue was dedicated to token buybacks. Over the past nine months, Pump.fun has burned approximately 36% of PUMP's circulating supply, which is one of the largest single-event supply reductions in cryptocurrency history.
The decision to change the strategy was influenced by the need for the company to invest in its growth and sustainability. Co-founder Alon Cohen emphasized that the business requires a portion of its revenue for strategic investments to ensure its longevity. The price performance of PUMP, which has largely traded sideways below its launch valuation despite the extensive buyback program, also played a role in this decision. The new strategy is seen as a turning point for Pump.fun and its token.
While the move to a 50/50 split might reduce the immediate impact of token burns due to declining revenue, it sets a foundation for consistent and long-term supply reduction. This could potentially lead to a more bullish outlook for PUMP, as the ongoing burns will continue to remove tokens from circulation, thereby reducing supply against steady demand. Following the announcement, PUMP saw a 6.9% increase in value over 24 hours, with the project maintaining significant cash flows, as evidenced by its annualized fees of $802 million and revenue of $416 million, according to DefiLlama data.