From launching platforms to AMM pools, the Meme empire of Pump.fun quietly emerged

Author: Shenchao TechFlow

"Everything that has shall be given to him; whatever he does not, even what he has shall be taken away from him."

---Go.

On the chain, the Matthew effect of the stronger the stronger the Matthew effect never stopped.

For example, Pump.fun began to do Raydium quietly: today it secretly launched a self-built AMM pool, trying to divide the liquidity revenue originally belonging to Raydium.

At present, this self-built AMM (http://amm.pump.fun) page is very simple, and you can swap any token like other DeFi products.

However, the thought behind this product may not be simple.

As we all know, Pump.fun has attracted a lot of Degen with its unique internal and external disk mechanism and memecoin culture.

User transactions are first matched in the internal trading of Pump.fun, and the transaction is completed by relying on the liquidity of the platform; when the internal trading is full, the transaction will be routed to the foreign trading, and the foreign trading actually relies on the liquidity pool of Raydium.

In this mode, Pump.fun has always been the "traffic provider" of Raydium, but it is also subject to Raydium's rules. Whenever the transaction flows to the outside market, Pump.fun has to pay a portion of the transaction fee, and this portion of the profit eventually flows to Raydium's liquidity provider (LP).

Raydium itself is one of the most important AMM platforms in the Solana ecosystem and an important infrastructure for DeFi users to obtain liquidity. It also provides liquidity pool services for many projects on Solana, and its TVL (total locked volume) has long been at the forefront of Solana.

As Solana's "liquidity center", Raydium occupies a pivotal position in the ecosystem. However, Pump.fun's new move is challenging this pattern:

Pump.fun is no longer content to be a "traffic provider" of Raydium, but tries to become a "controller" of liquidity.

Business behind self-built AMM pool

By building self-built AMM, Pump.fun can transfer the liquidity of the foreign disk from Raydium to its own platform, thus fully controlling the allocation of transaction fees.

If Pump.fun's strategy is successful, Raydium will not only lose some of its liquidity sources, but its revenue model and ecological status will also be impacted.

So, how do you calculate this account?

1.Raydium 's revenue model: Pump.fun's "hidden cost"

Under the existing model, Pump.fun's foreign trading relies on Raydium's liquidity pool, and each transaction will incur a certain handling fee, which eventually flow to the Raydium ecosystem.

• Raydium’s standard charges: A 0.25% handling fee is charged per transaction, including:

• 0.22% Liquidity Provider (LP) allocated to Raydium.

• 0.03% Repurchase and eco-support for $RAY.

• Pump.fun's trading volume: Assume that Pump.fun's daily trading volume is US$100 million, of which 5% of the trading volume (about US$5 million) are routed to Raydium's foreign market.

• Pump.fun’s hidden cost: Based on a 0.25% handling fee, Pump.fun needs to pay Raydium $12,500 per day, which is about $4,562,500 per year.

For a rapidly growing platform, although this fee has been reduced compared to before, it is still a dependence on external platforms.

2. Potential benefits of self-built AMM

By building self-built AMM, Pump.fun can transfer the liquidity of the foreign disk from Raydium to its own platform, thus fully controlling the allocation of transaction fees. So, how much potential benefits can this move bring?

• New revenue model: Assume that the charging standard for Pump.fun self-built AMM is the same as that of Raydium (0.25%), but all fees belong to the platform:

• Daily foreign trading volume is still $5 million.

• Based on a 0.25% handling fee, Pump.fun can directly earn US$12,500 per day.

• The cumulative annual income is approximately US$4.5625 million.

• Net income after removing LP costs: If Pump.fun's AMM does not rely on external LPs but provides liquidity by the platform itself, then this income will be entirely owned by the platform and does not need to be allocated to other liquidity providers.

3. Besides money, what else does Pump.fun like?

Build a self-built AMM not only brings direct revenue improvement, but also significantly enhances Pump.fun's control over the ecosystem, laying the foundation for future development.

Under the existing model, Pump.fun's foreign trading relies on Raydium's liquidity pool, which means that Raydium controls the user's trading experience and liquidity stability.

After building your own AMM, Pump.fun will fully control the rules and fee allocation of liquidity pools, thereby enhancing control over users.

After controlling liquidity, Pump.fun can further launch more DeFi products (such as perpetual contracts, lending agreements, etc.) to build a closed-loop ecosystem.

For example, Pump.fun can directly support the issuance and transaction of memecoin through its AMM pool, providing more gameplay for its community.

Related token price changes

After Pump.fun announced the launch of its own AMM, Raydium's token $RAY fell, with a daily decline of 20%.

This phenomenon may reflect market concerns about its future income and status.

Pump.fun's strategy could pose a long-term threat to Raydium, especially in terms of liquidity migration and fee income.

But on the other hand, after Pump.fun built its own AMM pool, the price of a MEME token Crack, which tested the liquidity pool, rose rapidly, with a market value of up to $4 million at one point.

CA:

CitRGsrgU7NjaXsxdMFc7sfsxtSnPdtkhHJqbPvhpump

Among the few market hotspots, the test tokens of AMM pool may be flying for a while.

The challenge is obvious

After building your own AMM, if it runs smoothly, Pump.fun will fully control the liquidity of the external disk, thereby significantly increasing revenue.

By integrating internal and external disk liquidity, Pump.fun can build a completely self-consistent on-chain Meme DeFi ecological closed loop.

From grabbing attention flow to grabbing where to grab funds, Pump.fun is clearly transforming from "relying on external liquidity" to "own liquidity".

After an innovative platform has more user base, it will certainly have the opportunity to shake the status of traditional DeFi and the on-chain ecological pattern through strategic adjustments.

However, whether Pump.fun can truly shake Raydium's position in the future will depend on its liquidity strategy and balanced ability of user growth; more importantly, whether the bull market is still there.

Time is luck.

Not only the leeks are in PVP, but the good show of the projects fighting each other is also being staged.