Solana’s Profitable Protocol Pump.fun Expands into DeFi

Solana’s most profitable protocol, Pump.fun, aims to capture a larger share of the DeFi economy with its new token swaps service, PumpSwap.

Unveiled on Thursday, PumpSwap utilizes the protocol’s liquidity pools, positioning itself against Solana’s traditional automated market makers (AMMs) that currently facilitate on-chain token trades.

Rather than transitioning highly-traded memecoins to Raydium, a longstanding hub for Solana DeFi pools, Pump.fun will now provide the launch liquidity for promising tokens directly within PumpSwap. The founders noted that this in-house approach will reduce launch costs and reshape the way Pump.Fun generates its historically high revenue.

The creators of Pump.Fun are optimistic that PumpSwap can emerge as the core of permissionless trading infrastructure for all tokens on Solana. They’ve already secured partnerships with multiple token projects to set up liquidity on PumpSwap.

Regarding any potential undisclosed technology advantages that might attract users away from established trading venues, the founders remained tight-lipped when questioned by CoinDesk. However, they believe distribution is key, as Pump.Fun’s surge of memecoins has significantly influenced the broader crypto landscape over the past year.

Recently, Pump.Fun reported generating $1 million in revenue, a stark contrast to its previous yearly profits but still outperforming many major crypto platforms, including Ethereum. This financial success might provide PumpSwap with a competitive advantage.

Raydium is expected to suffer the most, as much of its trading volume stemmed from pools seeded by Pump.Fun’s previous initiatives. Future trading activity will now likely shift to PumpSwap, although Raydium’s newly launched memecoin launchpad might mitigate some losses by introducing its own stream of memecoins.

Additionally, token creators may benefit from PumpSwap’s revenue-sharing model, which will allocate a fraction of the protocol’s 25 basis point trade fees to them, although specifics regarding amounts and timelines were not disclosed by the founders.