Pump.fun Trials Automated Market Maker (AMM), Threatening Raydium's Dominance on Solana

Pump.fun, a platform known for its focus on meme coins, is revolutionizing the liquidity landscape on Solana with the trial of its own Automated Market Maker (AMM).

Platform pump.fun, renowned for its meme coin focus, is making waves in the liquidity landscape on Solana by trialing its own Automated Market Maker (AMM). The test version of amm.pump.fun has sparked interest, hinting at the possibility of shifting liquidity flows in the Solana network. Currently, tokens created on Pump.fun move to Raydium to utilize its liquidity pools.

In these pools, liquidity providers earn a commission of 0.25% on each trade. Of this fee, 0.22% is distributed to liquidity providers (LPs), while the remaining 0.03% is used to repurchase RAY tokens. However, if Pump.fun fully implements its AMM, it could keep those fees within its own ecosystem, boosting its revenue stream and gaining tighter control over liquidity.

This news has had an immediate impact on the market. The price of the RAY token dropped over 28% in just a few hours, trading at around $3. This sharp decline is attributed to the market’s expectations of a reduction in Raydium’s commission-based revenue, especially if Pump.fun manages to attract trading volumes to its platform.

While Pump.fun's AMM is still in the testing phase, analysts foresee its potential to disrupt the liquidity dynamics of Solana. Some speculate that Pump.fun might introduce higher trading fees, in the range of 2% to 3%, and incorporate a reward system for its users.

With over $509 million in transaction fees generated since its launch, the platform stands to solidify its dominance in the meme coin space within Solana if its AMM achieves success. Meanwhile, Raydium has played a key role in the growth of these projects, receiving payments of up to 6 SOL (roughly $950) from projects migrating to its liquidity pools.

In addition to testing its AMM, Pump.fun has also stepped up its efforts against money laundering, especially after discovering that stolen funds from the Bybit hack were being used to create a token named QinShihuang on its platform. Upon detection, Pump.fun swiftly blocked and removed the token, demonstrating its commitment to maintaining the crypto ecosystem's security.