The Solana-based token issuance platform, Pump.fun, has been operating under a straightforward model where every dollar of revenue generated was used 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 reviewing the previous policy, the company has decided to adopt a new approach. In an announcement on X, Pump.fun revealed that it would be implementing a 50/50 revenue split. Under this new model, half of the net revenue from the platform's core products - the Pump.fun bonding curve, PumpSwap, and Terminal - will be allocated to an irreversible smart contract that automatically buys PUMP on the open market and burns it over the next year. The remaining half will be retained by the company to fund product development, hiring, marketing initiatives, and potential acquisitions.
This move marks a significant shift from the previous policy, where 100% of revenue was dedicated to token buybacks. 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 crypto history. Co-founder Alon Cohen explained that this change is necessary to ensure the company's long-term viability, stating that the business requires the additional revenue for investments and growth.
The decision to alter the revenue allocation strategy comes as PUMP's price has been trading sideways below its launch valuation, despite the platform generating over $1 billion in lifetime revenue. While the new approach may have its drawbacks, such as reduced burn amounts due to declining revenue, it also presents a bullish case for the token.
With 50% of future revenue locked into burns, a significant portion of the remaining tokens will be permanently removed from circulation, potentially leading to a supply-demand imbalance that could drive up the token's price. Following the announcement, PUMP saw a 6.9% increase in value, with the platform's annualized fees and revenue standing at $802 million and $416 million, respectively, according to DefiLlama data.