Source: Unchained

Compiled by: lenaxin, ChainCatcher

Editor’s Note:

The content of this article is compiled from a video interview between Unchained and Syncracy Capital co-founder Ryan Watkins, which analyzes PumpFun’s profit model, valuation logic, systemic risks and potential transformation path.

On June 3, @NextFuckingThing revealed that "PumpFun plans to raise $1 billion through ICO at a fully diluted valuation of $4 billion, and may airdrop 10% of tokens to the community." The news triggered a strong response from the community. Trader Ansem compared it to "the second plane hitting the Twin Towers." The poll he initiated showed that 70% of participants believed that PumpFun had a negative impact on the crypto industry.

ChianCatcher compiled and edited the content.

Wonderful Views

• Without explaining where the funds went, PumpFun was making profits while raising another $1 billion in financing, which was a serious drain on user trust.

• With nearly half of its trading volume controlled by robots and third parties, PumpFun is gradually losing control of its own ecosystem.

• What really retains users is never the airdrop, but the product itself.

• The value of a token does not rely on financing gimmicks, but on clear use and execution.

1. Why PumpFun made $700 million but is on the verge of a trust collapse

Laura Shin: I would like to ask you about your views on the incident and how you evaluate the market's reaction?

Ryan Watkins: Over the past two years, meme coins have been the most controversial asset class in the crypto space, and PumpFun has become the poster child for this controversy. Since its launch in the first quarter of 2024, the platform has accumulated $700 million in revenue with a 1% transaction fee and bonding curve mechanism, making it one of the most profitable projects in the crypto economy.

However, behind this commercial success are many problems: ordinary investors are suffering increasingly serious losses, mainly due to systemic risks such as market manipulation robots and insider trading; the originally simple community culture has been transformed into a complex "meme coin industry chain"; what is more noteworthy is that the platform launched a $1 billion financing to the loss-making user group without clarifying the purpose of the funds.

From the perspective of commercial value, although its profit model is controversial, its financial performance is solid; in the current market environment, if the meme coin trend continues, its valuation is still reasonable; in essence, the project provides an investment opportunity in "platform equity", and this feature just explains its nature of coexistence of controversy and value.

Laura Shin: Is PumpFun still trustworthy?

Ryan Watkins: If PumpFun's $1 billion ICO is successful, it will become the third largest financing in the history of cryptocurrencies, second only to EOS's $4.2 billion and Telegram's $1.7 billion. The fact that a meme coin platform has raised a single round of financing comparable to industry giants such as Circle is itself worthy of further discussion.

Although its newly launched AMM protocol has an annualized revenue of $52 million, it is still insignificant compared to the platform’s total revenue of $700 million. More importantly, in the absence of major product breakthroughs, the platform has neither specified the specific use of funds nor responded to questions raised by industry insiders such as Vanna Charmer about the efficiency of capital allocation.

From the perspective of development strategy, signing top content creators with a large sum of money may be the most direct breakthrough. Refer to the contract value of top creators such as Aiden Ross, which is often hundreds of millions of dollars. In the longer term, mature business models in the crypto field such as developing public chains, establishing exchanges, or issuing stablecoins are all possible directions. But the core problem is that when the platform is still dominated by robots, any ecological layout will find it difficult to solve the fundamental trust crisis. For PumpFun, rebuilding community consensus is far more important than pursuing financing scale.

(II) PumpFun’s big gamble: the ambition and concerns behind the 1 billion yuan financing

Laura Shin: If the ICO is successful, which strategy do you think would be the best choice?

Ryan Watkins: If I were to lead the use of this money, my first priority would be to build a top social media product team. I would focus on recruiting talents with artificial intelligence backgrounds from platforms such as TikTok and Meta to reconstruct the current chaotic content discovery mechanism. The current information flow experience of PumpFun does have obvious flaws, and users often fall into meaningless browsing cycles.

Secondly, we will invest heavily to introduce top content creators, including crypto-native KOLs and top anchors in traditional fields. Although the signing cost is high, it is a necessary move to quickly establish a content ecosystem. At the trading product level, we can consider cooperating with innovative protocols such as Hyperliquid, and learn from its HIP-3 profit-sharing mechanism to develop a perpetual contract market for meme coins; of course, with the existing financial strength, it is also completely feasible to build an exchange independently.

But the most important thing is to clarify the purpose of the funds. If a large-scale token repurchase plan can be launched to directly improve the token value capture ability, it may be the most community-recognized solution. After all, in the absence of a clear roadmap, any grand idea will be difficult to gain user trust.

Laura Shin: Does PumpFun really need such a huge amount of financing to transform?

Ryan Watkins: PumpFun can completely break through the limitations of meme coins and transform into a broader asset issuance platform. As the leading issuance platform with a current market share of 95%, its advantages are obvious: sufficient capital reserves, one of the most popular front-ends in the Solana ecosystem, and a continuously growing mobile user base.

The transformation direction can focus on building a universal capital market infrastructure:

• Expand asset categories and introduce new assets such as Internet capital market tokens

• Establish a strict asset screening mechanism to distinguish it from the current disorderly state

• Develop supporting functions, such as founder lock-up period, compliant fundraising tools, etc.

This transformation touches on the fundamental contradiction in the crypto space: How to set reasonable boundaries in a permissionless system? The current situation of PumpFun has triggered a profound discussion on "what should be built on the blockchain" - should we continue to support purely speculative tools or turn to platforms that create real value? There is no standard answer to this question, but it is indeed a topic that the entire ecosystem must face.

Laura Shin: Given the current context of declining revenue, what are PumpFun’s strategic considerations for launching an ICO at this time?

Ryan Watkins: Analyzing the ICO valuation of PumpFun from an investment perspective, the pricing logic of its $4 billion valuation corresponding to an 8x price-to-sales ratio is questionable. Although the platform's recent 30-day revenue performance of $45 million (annualized $500 million) seems to support this valuation, the particularity of the meme coin market makes this linear deduction fundamentally flawed.

The case of Trump meme coins proves that the trading volume of such assets is highly dependent on occasional celebrity effects, and the market obviously finds it difficult to continue to create more influential events. Even if the current trading volume remains at a relatively high level, the sustainability of this growth model is questionable.

The deeper problem is that the platform has not yet demonstrated the ability to break through the cyclical characteristics of meme coins, and the growth expectations implied by the 8x price-to-sales ratio may have overdrawn future potential. If PumpFun cannot build a new growth engine that exceeds celebrity coin issuance, the current valuation may face severe tests.

Laura Shin: Are there risks associated with PumpFun’s early liquidity terms at its current $4 billion valuation?

Ryan Watkins: This fully liquid design is not surprising given the nature of ICOs - tokens can be freely traded once they are listed. As long as all investors participate at a uniform valuation, this no lock-up period clause itself is not a problem.

3. Can PumpFun “vindicate” Solana instead of creating another airdrop game?

Laura Shin: How does Solana find a strategic balance between maintaining the traffic dividend brought by the meme and getting rid of the stigma of "speculative public chain"?

Ryan Watkins: The market has reasonable doubts about PumpFun's $1 billion ICO. After all, the platform has made a profit of $700 million but is still raising funds. In the short term, it may cause capital diversion, leading to selling pressure on Solana and related assets.

But in the long run, if the financing is successful, it will enhance Solana's status as a mainstream financing platform, attract more high-quality projects to settle in, and change the current ecological pattern dominated by meme coins. This benchmark case can also lower the market's psychological threshold for the scale of ICOs and stimulate more compliant fundraising activities.

The key lies in whether PumpFun can use the funds for substantive innovation rather than continuing financial games. This will determine whether this ICO will ultimately be an opportunity for ecological upgrading or another capital harvest.

Laura Shin: What are the considerations behind PumpFun's choice of ICO as the main financing strategy and airdrop as the auxiliary financing strategy?

Ryan Watkins: Most airdrops do not add real value to the product, but instead give free money to users who don't really care about the product - these people often sell out immediately after receiving the airdrop. Hyperliquid is one of the few successful cases not because users hold the airdropped tokens for a long time (in fact, most people still choose to sell), but because it has strong product power and sustainable revenue model. Airdrops here are only used as an auxiliary means to show community consistency, which is consistent with the concept of decentralization. The key revelation is:

• Airdrops should be implemented after the product matures and must give users a good reason to hold tokens

• For the Solana ecosystem, airdrops may compensate some meme coin traders for their losses and reactivate market enthusiasm.

• But in essence, airdrops are just icing on the cake, and the value of the product itself is the determining factor.

Blindly imitating the airdrop model will only result in a waste of resources. Project parties should focus on building a product foundation with real needs.

4. From a trading venue to a super app? PumpFun’s breakthrough and watershed moment

Laura Shin: How does PumpFun stay ahead of the growing competition?

Ryan Watkins: PumpFun is facing a core challenge: nearly half of the trading volume is controlled by third-party interfaces and robots, causing the platform to gradually lose its position as the entry point for asset distribution. If this trend continues, it will weaken its dominance over the ecosystem. Large third parties can easily build their own coin issuance platforms (as shown in the Radium case) to divert users and liquidity. Although it currently maintains its position with its liquidity advantage, it must enhance user stickiness in the long run to consolidate its competitiveness. Its response strategy focuses on two directions:

1. Social transformation: Create emotional stickiness by building a social graph, so that users stay because of social relationships rather than simple transaction needs (in line with the law proposed by Chris Dixon that "tools attract users, and network effects retain users")

2. Functional generalization: transform competitors’ innovations into their own functional modules, upgrading from a single meme platform to a comprehensive portal

Fundamentally, PumpFun needs to complete the transformation from a "trading venue" to a "social + financial super application" before its liquidity advantage fades, otherwise it is only a matter of time before third parties share the ecosystem. Failure cases such as Radium show that pure technology replication is difficult to shake the market leader, but ecological reconstruction combined with social relationships may change the rules of the game.

Laura Shin: Any other comments or suggestions about PumpFun?

Ryan Watkins: This industry always has controversial but exciting turning points from time to time. Can PumpFun successfully raise $1 billion? How will the market digest this news? What exactly will the funds be used for? Regardless of the final result, as one of the most well-funded and widely used products in the crypto space, PumpFun’s every move may have a profound impact on Solana and the entire industry ecosystem. This is bound to be a landmark event worthy of close attention.

Disclaimer

The content of this article does not represent the views of ChainCatcher. The views, data and conclusions in this article represent the personal positions of the original author or the interviewee. The compiler maintains a neutral attitude and does not endorse its accuracy. It does not constitute any advice or guidance in any professional field. Readers should use it prudently based on independent judgment. This compilation is limited to the purpose of knowledge sharing. Readers are requested to strictly abide by the laws and regulations of their region and not participate in any illegal financial activities.