Pump.fun tests the creation of its own AMM exchange: Raydium in danger

The launchpad platform of memecoin Pump.fun is secretly testing the development of a new AMM exchange that could replace the partner Raydium.

Memecoin launchpad Pump.fun is reportedly working on a new AMM exchange behind the scenes, which could replace its partner Raydium. This new automated market maker, yet to be officially announced, might siphon off a portion of Raydium’s revenue, threatening its dominance in the DEX landscape on Solana.

The news caused the value of RAY, the native token of Raydium, to plummet by 32%, sparking concerns over a potential decline in the protocol’s income.

Pump.fun Tests Creation of Own AMM Exchange: Raydium at RiskAccording to reports from several users on X, the renowned platform Pump.fun is said to have begun working on its own automated market maker (AMM). The latter represents the classic decentralized exchange system employed by DEXs, based on a liquidity pool that enables users to trade tokens without requiring a direct counterparty. Unlike traditional exchanges that match buyers and sellers through an order book, in AMMs the prices are determined based on supply and demand with smart contracts that automatically regulate the transactions.While there is still no official announcement from Pump.fun, a linked URL to the platform’s site reveals an interface for swapping two assets, typical of AMMs. This revelation suggests that the famous memecoin launchpad is planning an expansion into the world of DEXs, challenging the industry leader Raydium. If confirmed, this move could mark a significant shift in the landscape of decentralized exchanges on Solana, with Pump.fun potentially taking away liquidity and trading volume from Raydium.In the last few hours, the term “Pump.fun AMM” has also appeared on the DexScreener dashboard, which shows all the DEXs of each chain. Unusual internal transfers on the protocol have also been observed on SolScan, suggesting the launch of a new exchange. At the moment, several tokens have already been listed within this beta section, most of which, however, have very low trading liquidity. Several memecoins among those present have already ruggedad, despite being launched recently.Raydium Sees Its Dominance in Solana DEX Sector ChallengedThe potential launch of an AMM exchange by Pump.fun risks throwing a spanner in the works for Raydium, which would see part of its market share taken away. Normally, when a token launched on Pump.fun reaches a market capitalization of $100,000, it is listed on Raydium. At this stage, $17,000 of liquidity are deposited on Raydium, with LP being burned to prevent these funds from being withdrawn and to keep them available for trading.The AMM of Pump.Fun would mean that the tokens are no longer migrated to Raydium, but rather pass directly through the new DEX exchange of the platform. Obviously, this translates into a possible reduction in trading volumes for Raydium, which would lose about 25% of the current trading volume coming from the coins that reach the bonding curve on Pump.fun.In any case, it is important to emphasize that Raydium represents the largest exchange operating on Solana, and supports many major markets outside of memecoin. The transactions between SOL and stablecoin and between SOL and other tokens launched directly on the DEX contribute to bringing about $500 million in average daily volumes. At the same time, Pump.fun with this new initiative could increase its stellar volumes, which in the last two weeks alone have reached $2.4 billion.RAY Drops 32% on Market Amid Fears of Decline in Protocol RevenuesAmid the speculations for the implementation of an AMM section by Pump.fun, the Raydium token (RAY) has seen many investors leave. A few hours after the news spread, the asset plummeted by 32%, dropping from $4.2 to the current $2.90. This price decline reflects fears of a decrease in Raydium protocol revenues, with a consequent reduction in buybacks on the market.Since the launch of Pump.fun in 2024, over 8 million tokens have been generated on the platform. Each time one of these tokens is listed on Raydium, a fee of 0.2 SOL is applied, which contributes to the exchange’s revenue. However, this source of income could be challenged if the flow of tokens starts to shift towards Pump.fun’s new AMM. If the tokens were traded directly within its ecosystem, Raydium would see a significant decrease in its revenue from transaction fees.To this is added the fact that Raydium would also lose the fees derived from the swaps of tokens born on Pump.fun and then migrated to its own DEX. Every year Raydium collects $1.67 billion in fees, part of which is used to purchase RAY on the market, curbing its inflation and providing an incentive to holders. Furthermore, the risk for Raydium is not only the loss of liquidity coming from Pump.fun tokens, but also the potential shift of other projects that might prefer the new AMM if it implemented competitive fees.