Pump.fun, a Solana-based token issuance launchpad, has been operating under a straightforward model where every dollar of revenue was allocated towards buying and burning its native token, PUMP. The goal was to consistently reduce the token's supply, thereby supporting its price and aligning its value with the platform's success. However, after reviewing the previous policy, the company has decided to adopt a new approach.
Going forward, Pump.fun will split its revenue evenly between token buybacks and operational costs, including product investment, hiring, marketing, and potential acquisitions. This shift marks a significant change from the previous policy, where 100% of revenue was dedicated to buying back and burning PUMP tokens.
Over the past nine months, the company has burned approximately 36% of PUMP's circulating supply, which is one of the largest single-event supply reductions in crypto history. The decision to change the policy was driven by the need to allocate resources towards growing the business and ensuring its long-term sustainability.
According to Co-founder Alon Cohen, the company requires half of its revenue for product development, hiring, and marketing to secure its future. The price chart of PUMP has been trading sideways below its launch valuation despite the previous buyback policy, which has generated over $1 billion in lifetime revenue.
The new policy is expected to have both positive and negative effects on the token's price. On one hand, the reduced revenue allocation for buybacks may lead to smaller token burns, which could negatively impact the token's price. On the other hand, the ongoing burns will continue to reduce the token's supply, which could lead to a bullish setup if demand remains steady. In the 24 hours following the announcement, PUMP's price rose by 6.9%, and the company's annualized fees and revenue stand at $802 million and $416 million, respectively, according to DefiLlama.