Pump.fun, a Solana-based token issuance platform, is abandoning its previous model of allocating 100% of revenue towards buying and burning its native token, PUMP. This approach, which has been in place for nine months, was intended to support the token's price by consistently reducing its supply.
However, the company has now decided to adopt a 50/50 revenue split, where half of the net revenue from its core products will be used for token buybacks and burns, while the remaining half will be retained for product development, hiring, marketing, and potential acquisitions. According to the company, the previous policy resulted in the burn of approximately 36% of PUMP's circulating supply over the past nine months. The new strategy aims to strike a balance between token price support and the company's operational needs, ensuring its sustainability for years to come.
Co-founder Alon Cohen emphasized the importance of this change, citing the need for revenue allocation towards growth initiatives to secure Pump.fun's long-term success. The shift in strategy comes as PUMP's price has largely traded sideways below its launch valuation, despite the significant token burns. While the move may be seen as a positive development, it also raises concerns about the potential impact of declining revenue on token burns.
The bear case suggests that the reduced revenue may lead to smaller burns, while the bull case argues that the ongoing burns will continue to reduce the token's supply, potentially creating a bullish setup. Following the announcement, PUMP's price rose by 6.9% within 24 hours, with the platform generating significant cash flows, according to DefiLlama data.