Pump.fun, a Solana-based token issuance platform, has been operating under a unique model where every dollar of revenue was dedicated to buying and burning its native token, PUMP. The goal was to reduce the token's supply, thereby potentially increasing its value.
However, after reviewing the effectiveness of this strategy, the company has decided to adopt a new approach. Going forward, half of the revenue generated from its core products - Pump.fun bonding curve, PumpSwap, and Terminal - will be allocated to an irreversible smart contract that buys and burns PUMP tokens on the open market.
The remaining half will be retained by the company to fund product development, hiring, marketing, and potential acquisitions. This shift in strategy comes after Pump.fun burned approximately 36% of PUMP's circulating supply over the past nine months, with co-founder Alon Cohen citing the need for a more sustainable approach to ensure the platform's long-term viability. The change in strategy is driven by the realization that the previous model, although resulting in significant token burns, did not yield the desired price appreciation due to the cyclical nature of memecoin launchpad volume. By locking 50% of future revenue into token burns, Pump.fun aims to create a more stable and bullish environment for its token, as the ongoing reduction in supply could lead to increased demand and, subsequently, a potential price surge.