How Does PumpSwap Work?

PumpSwap uses a Uniswap V2-style constant product AMM (x*y=k) for token trading, with 0.25% trading fee split 0.20% to LPs and 0.05% to protocol

Standard CPMM model similar to Raydium V4 and Uniswap V2. The fee structure is competitive but conventional.

Tokens that complete their bonding curve on pump.fun automatically migrate to PumpSwap AMM pools with zero migration fee, replacing the previous Raydium migration path that charged 6 SOL

Automated bonding curve graduation to AMM is a novel vertical integration model. Eliminates migration friction but creates a closed ecosystem that captures all post-graduation trading volume.

PumpSwap automatically seeds initial liquidity for graduated tokens using SOL collected during the bonding curve phase, creating instant tradeable markets

Automatic liquidity seeding from bonding curve proceeds is a novel mechanism that ensures every graduated token has immediate liquidity. However, initial liquidity depth depends on bonding curve completion amount.

Creator revenue sharing model where a portion of trading fees flows back to token creators, incentivizing token launch activity on the platform

Creator revenue sharing from DEX fees is a novel incentive alignment model. However, it also incentivizes creating tokens purely for fee extraction rather than genuine utility.

Standard two-sided LP provision where users deposit token pairs to earn 0.20% of trading volume as swap fees

Standard LP model. High impermanent loss risk due to extreme volatility of memecoin assets. Most LP positions in memecoin pairs lose value rapidly.

Highly concentrated memecoin trading venue processing $1B+ daily volume at peak, with rapid token listing cycles — thousands of new tokens per day from pump.fun graduations

Scale of memecoin trading activity is unprecedented but the market-making mechanics are standard. High token turnover creates a challenging environment for sustainable liquidity provision.

The predictable migration from bonding curve to AMM creates a window where sophisticated actors can front-run the liquidity transition. Snipers can position in the AMM pool before retail traders, extracting value from the price discovery gap between bonding curve and AMM pricing.

Fee revenue sharing with token creators incentivizes mass token creation for fee extraction. Creators can launch tokens, generate initial hype for trading volume, then collect fees while the token price collapses — a sanctioned form of pump-and-dump enabled by the fee model.

LPs providing liquidity to memecoin pairs face extreme impermanent loss as most tokens decline 90%+ from graduation price. The 0.20% fee share rarely compensates for IL in highly volatile, short-lived token markets.

Shallow initial liquidity pools from bonding curve proceeds create high-slippage trading environments. Large trades relative to pool size cause extreme price impact, enabling sandwich attacks and price manipulation.

PumpSwap's massive memecoin trading volume creates concentrated MEV extraction opportunities on Solana. Sandwich bots targeting PumpSwap trades generate significant harmful MEV, degrading user execution quality across the platform.