Pumpfun, a Solana-based token launch platform, is developing its own automated market maker (AMM), potentially changing memecoin and microcap token trading.
What Is Pumpfun's AMM About
An automated market maker (AMM) allows users to trade cryptocurrencies directly in liquidity pools rather than traditional order books. Currently, when a memecoin on Pumpfun gains popularity, it graduates to Raydium. However, Pumpfun's own AMM could retain liquidity and capture more trading fees, introducing new financial products like memecoin perpetuals and lending.
Impact on Raydium's Business
If Pumpfun fully integrates its AMM, the need for new tokens to move to Raydium could decrease, allowing the platform to control its liquidity pools and extract higher fees. This forecasts a 30-50% drop in Raydium's trading volume, already leading to a 30% drop in RAY token price. If liquidity starts shifting, Raydium might need to adjust fees and add incentives.
New Features or New Risks?
Apart from potential new features like memecoin perpetuals, lending pools, and unique reward mechanisms, launching an AMM might come with certain risks: security vulnerabilities, regulatory scrutiny, and trust issues, considering Pumpfun's recent security concerns.
Pumpfun has the potential to significantly influence Solana's memecoin market but may face challenges such as competition from Raydium and trust issues from users.
