Pump.fun, a Solana-based token 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 comprehensive review, the company has decided to alter this strategy. Going forward, Pump.fun will adopt a 50/50 revenue split.
Half of the net revenue from its core products - the Pump.fun bonding curve, PumpSwap, and Terminal - will be allocated to an irreversible smart contract designed to automatically purchase PUMP on the open market and burn it over the next year. The remaining half will be retained by the company to fund product development, hiring, marketing efforts, and potential strategic acquisitions.
This shift comes after Pump.fun burned approximately 36% of PUMP's circulating supply, acquired through buybacks over the past nine months, in two transactions on the Solana blockchain. The decision to change the revenue allocation policy was necessitated by the need for the company to invest in its growth and sustainability. Co-founder Alon Cohen emphasized that retaining half of the revenue is crucial for the company's long-term viability and success. The price performance of PUMP, which has been trading sideways below its initial valuation despite significant buybacks, also played a role in this strategic decision.
While the move could have both positive and negative implications, the ongoing burns are expected to reduce the token's supply significantly, potentially leading to a more bullish outlook for PUMP in the future.