The Solana-based token issuance platform, Pump.fun, has been operating under a straightforward model where every dollar of revenue generated was utilized to purchase and burn its native token, PUMP. Theoretically, this continuous reduction in supply was intended to support the token's price and align its value with the platform's success. However, after a review of the previous nine-month period, during which 100% of revenue was dedicated to buybacks, the company has decided to adopt a new strategy.
Pump.fun will now allocate half of its future net revenue from its core products - the Pump.fun bonding curve, PumpSwap, and Terminal - towards an irreversible smart contract that automatically buys PUMP on the open market and burns it. The remaining half will be retained by the company to fund product development, hiring, marketing, and potential acquisitions.
Over the past nine months, Pump.fun has burned approximately 36% of PUMP's circulating supply, amounting to the tokens bought back from the open market. This burn is one of the largest single-event supply reductions in crypto history. Co-founder Alon Cohen explained that this shift is necessary for the company's long-term sustainability, as it requires a portion of the revenue for investments, hiring, and marketing to ensure Pump.fun's viability for decades to come. The decision to change the revenue allocation strategy is partly due to PUMP's price chart, which has been trading sideways below its launch valuation despite the significant buybacks and over $1 billion in lifetime revenue.
The new strategy is expected to have both positive and negative effects on the token's price. On one hand, the reduced revenue allocated to buybacks may result in smaller burns, potentially affecting the token's price. On the other hand, the ongoing burns will continue to reduce the supply of PUMP, which could lead to a bullish setup if the demand remains steady.
Following the announcement, PUMP's price increased by 6.9% within 24 hours, with annualized fees of $802 million and revenue of $416 million, according to DefiLlama.