Pump.fun, a Solana-based token issuance launchpad, has been operating under a unique model where all revenue generated was used to buy back and burn its native token, PUMP. This approach, in theory, aimed to consistently support the token's price by reducing its supply. However, after a nine-month review, the company has decided to alter this strategy. Instead, it will now divide its revenue evenly between token buybacks and operational costs, including product development, hiring, marketing, and potential acquisitions.
This change marks a significant shift from the previous policy, where 100% of revenue was dedicated to buying back and burning PUMP tokens. 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 revenue allocation was partly due to the token's price performance, which has been trading sideways below its launch valuation despite the significant buybacks.
Co-founder Alon Cohen explained that the company needs to retain half of its revenue to ensure the long-term sustainability of Pump.fun. The new strategy will see half of the revenue from Pump.fun's core products - the bonding curve, PumpSwap, and Terminal - being used for token buybacks, while the other half will be used for operational expenses. This change is expected to have a significant impact on the token's price, with some analysts arguing that the reduced supply could lead to a bullish setup for PUMP.
Others, however, point out that the launchpad's revenue is cyclical and may decline, resulting in smaller token burns. The market has already reacted to the announcement, with PUMP's price increasing by 6.9% in the 24 hours following the news.