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Solana’s Raydium Faces Uncertainty as Pump.Fun Tests Its Own Automated Market Maker
Solana’s dominant automated market maker (AMM) Raydium hit back on Monday on rumors that major volume driver Pump.Fun was preparing to launch its own AMM.
Abandoning Raydium whole hog would be a “strategic miscalculation” for the massively popular — and profitable — memecoin factory, core contributor InfraRAY said in a post on X. He cast doubt on the notion that Pump.Fun could replicate its success if it swaps Raydium out for in-house trading infrastructure.
Token Investors Dump RAY Amid Rumors of Pump.Fun’s New AMM
Token investors dumped RAY en-masse this weekend after hawk-eyed observers noticed Pump.Fun was apparently testing its own AMM, presumably with the intent to replace Raydium’s longstanding liquidity pools as its platform of choice. Such a move would shake up the economics of decentralized token trading on Solana.
Raydium’s Dominant Position in Solana’s Token Trading Ecosystem
Right now, Raydium, the chain’s largest AMM platform, captures trading fees generated by Pump.Fun memecoins that “graduated” from the launchpad to its own pools. The arrangement — in place since Pump.Fun’s earliest days — has been a financial boon for Raydium.
But it also leaves Pump.Fun out of the long-term upside of the tokens its users create. That’s not to say it’s making nothing: Pump.Fun has amassed half a billion dollars on the fees it collects from early-stage token launches, one of crypto’s grandest war chests.
Raydium’s Revenue Streams
Raydium is currently generating over $1 million in fees every day from trading across all its liquidity pools, not just those of Pump.Fun tokens, according to a Dune dashboard, meaning a good share of its fees could dry up if Pump.Fun switches away.
“100%, revenue hit is real,” InfraRAY said in a message to CoinDesk. But he cautioned that the market’s 30% haircut on RAY tokens was “overblown” and partially due to SOL’s own weakness.
Risks Associated with Pump.Fun’s Potential AMM Pivot
He said any pivot to a new AMM could hit myriad issues: inadequate supporting infrastructure, low demand for migrated tokens, a flop on volume at launch.
“I think that’s a real risk they are overlooking but I could be wrong,” InfraRAY said.
Pump.Fun’s Response
Pump.Fun co-founder Alon Cohen declined to comment.
Conclusion
Raydium’s long-standing partnership with Pump.Fun is under scrutiny as the memecoin factory tests its own automated market maker. While InfraRAY believes a pivot to a new AMM would be a strategic miscalculation, the market’s 30% haircut on RAY tokens remains a concern. As the situation unfolds, the fate of Raydium’s revenue streams and the Solana ecosystem hangs in the balance.
FAQs
- What is an automated market maker (AMM)?
An AMM is a type of trading platform that provides liquidity to a market by buying and selling assets at a constant price, allowing for the execution of trades. - What is Raydium?
Raydium is a dominant automated market maker (AMM) on the Solana blockchain. - What is Pump.Fun?
Pump.Fun is a memecoin factory that has been using Raydium’s liquidity pools for its token launches. - What are the potential risks associated with Pump.Fun’s potential AMM pivot?
The potential risks include inadequate supporting infrastructure, low demand for migrated tokens, and a flop on volume at launch. - Has Pump.Fun commented on the rumors?
Pump.Fun co-founder Alon Cohen declined to comment.
