When Platforms Profit From Zero-Value Tokens: Dissecting Pump.fun’s Incentive System That Backfires on the Meme Ecosystem
The current public outcry calls for KOLs to take responsibility for their shill recommendations, which is perfectly understandable. However, if the incentivizing platform, Pump.fun, faces no corresponding accountability, merely restricting shillers will only treat the symptoms, not the root cause.
Pump.fun Profits from Zeroing Tokens
In the past thirty days, Pump.fun captured 92% of all token launches across the chain among meme coin launchpads and 84% of the issuance sector's trading volume. It is precisely this platform that dictates which behaviors within this trading ecosystem can generate profits.
Ninety-five percent of the platform's protocol revenue comes from tokens that are still within the bonding curve phase or have a market capitalization below $250,000. During the bonding curve trading window, every buy/sell transaction incurs a 1.25% fee: 0.95% goes to Pump.fun and 0.30% goes to the token creator.
This means that disregarding price fluctuations, the trading cost for a complete round-trip trade already reaches 2.5%.
Chart: From September 2, 2025, to November 5, 2026, 95% of Pump.fun's protocol revenue came from tokens within the bonding curve or with a market cap below $250,000
Platform revenue concentrates in the early stage when a token's market cap climbs into the hundreds of thousands of dollars. Whether a token subsequently achieves significant price action has minimal impact on platform revenue.
Analyzed by token lifespan, the conclusion is equally clear: three-quarters of the platform's revenue comes from tokens launched less than an hour ago, and 87% comes from tokens launched under a day ago. Pump.fun's revenue is highly concentrated in the first hour window after a token's birth.
Chart: Since September 2, 2025, nearly 75% of Pump.fun's recent revenue came from tokens launched less than an hour ago, with tokens launched on the first day accounting for 87% of total revenue
For those eventually growing into top-tier viral hits, the fees contributed to the platform are almost negligible: the five breakout tokens with a peak combined market cap of $1.4 billion generated only about $1.5 million in fees for Pump.fun; whereas low-cap tokens within the bonding curve or under $250k market cap collectively contributed $506 million in revenue.
In short, a thousand low-cap tokens that go to zero at a $20k market cap yield more profit for the platform than one popular token that grows to a $100M market cap.
Chart: The five top breakout tokens with a combined peak market cap of $1.4B only contributed $1.5M in fees to Pump.fun, far less than the $506M brought in by low-cap tokens
The fees contributed by these fifteen top-tier breakouts account for less than 0.33% of the total contribution from low-cap tokens.
Thus, the design orientation of the platform's product mechanics is to continuously accept more new tokens for listing. Every incentive rule on the platform guides the market to pursue token issuance volume, because trading volume scale is the foundation of platform revenue.
The Underlying Logic of Four Types of Incentivized Behaviors
Every type of chaos criticized by the community has a corresponding profitability logic within the platform's mechanics: block bundling, bulk token creation workshops, shill incentives, and PvP player-vs-player modes all ultimately generate trading fees, which Pump.fun cuts from each transaction.
Chart: Block bundling, bulk token creation, shilling, and PvP gameplay all increase trading frequency, allowing Pump.fun to earn a fee from every single transaction
Bundlers: Leveraging Extremely Low Initial Market Cap and Liquidity for Launch Sniping
The reason bundlers can thrive lies in the platform's low standards for initial market cap and initial liquidity settings. Traders only need to invest a small amount of SOL, distributed across dozens of wallets, to absorb a large chunk of chips in the launch block, then immediately dump them to retail traders. The lower the initial market cap, the lower the cost of this operation, and these initial parameters are set by Pump.fun.
Bulk Creators: Listing Tokens in Batches, Creator Fees Settled by Trading Volume
Developers issuing tokens in bulk are emerging endlessly because the creator fee rewards the act of issuance itself, rather than long-term token operation. Regardless of whether a token lasts only an hour or circulates long-term, the creator can extract a 0.30% fee from every transaction. Therefore, the rational strategy is to issue as many tokens as possible, harvest early trading volume, and quickly pivot to the next target.
The top twenty-five most active launch addresses collectively issued 761,000 tokens. Less than one percent successfully "graduated," yet these addresses accumulated $128 million in profits.
Chart: Pump.fun's top 25 launch addresses issued 761,000 tokens and profited $128M, with a graduation rate of less than 1%
The wallet ranked first alone issued 171,195 tokens, averaging about $200 in profit per token.
Of course, these bulk creation workshops occasionally do spawn viral hits: two wallets' issued tokens peaked at market caps of $122 million and $327 million respectively. But for the issuers, producing a breakout hit is merely a coincidental side effect; their core revenue source remains the early trading volume itself.
Shill KOLs: Preferring Low-Cap Tokens, Incentives Based on Trading Volume
The shilling incentive mechanism has opened a new monetization channel for pump marketing, transforming shilling behavior into a profitable venture. Since August, the platform has distributed $29.6 million in shill rewards across 51,115 wallets, with highly unequal bonus allocation: ten wallets split 16% of all bonuses, while the median bonus for ordinary recipients was just $13. The top ten winning wallets averaged about $485,000 each.
Chart: From August 12 to November 8, 2026, Pump.fun's shill rewards were highly concentrated, with only 10 wallets capturing 16% of the total $29.6M reward pool
The incentive amount is calculated based on trading volume driven by shilling, and low-cap token order books are thinnest, making them easiest to manipulate via trading volume. In August, among the top 50 highest-earning shillers, forty primarily promoted tokens with an average market cap under $100,000; twelve had primary tokens averaging under $10,000.
Chart: Among Pump.fun's top 50 highest-earning shillers, 40 primarily promoted tokens with an average market cap under $100K
The market's criticism has been received by Pump.fun. On October 10, the platform announced that future incentives would be tied to followers' P&L, while simultaneously reducing the reward weight for low-cap token shilling.
However, within three weeks after the rule adjustment, the proportion of bonuses directed toward tokens with a median market cap under $100k among the top 20 shillers rose from 68% to 94%, while the total weekly bonus payout actually increased by 53%.
Chart: After Pump.fun announced cuts to low-market-cap shill rewards, the reward share for low-cap shilling instead rose to 94%
As the total bonus size expanded, the proportion allocated to low-cap shilling also rose in tandem.
Ultimately, the traders following the shills bear the losses. The research team tracked fourteen shill KOLs: among them, ten primarily promoted tokens with a median market cap under $100k, and their followers collectively lost $926,000 the day after the shill post. For the pumped tokens, the median price surged 6% one minute after the announcement, fell 48% after one hour, and dropped 74% after a full day.
Regardless of whether the token goes up or down, shillers get paid.
Chart: Out of 14 tracked top shillers, 10 focused on sub-$100K market cap tokens, resulting in $926K collective follower losses
Among the fourteen, only one shiller allowed followers to realize a small profit of $10,000. For all pumped tokens, the median price on the day after the shill post closed lower across the board.
Chart: Token median prices drop 48% one hour after paid shills, falling 74% after a day
A major part of why the public wonders how it's possible that KOLs consistently recommend tokens that bleed their followers lies here: the platform's incentive design itself actively pays to encourage such behavior.
PvP Player-Versus-Player Mode: Goal is to Increase Single-User Trading Frequency
The underlying logic of the PvP mode is a market lacking fresh capital, where veteran traders extract gains from newcomers. These modes are designed from the outset to facilitate faster trades and elevate individual user trading frequency, generating a fee on every successful transaction.
Pump.fun itself even removed one such mode on June 30: Tokenized Agent. The platform's stated reason was that too many token emission channels spawned a "toxic PvP ecosystem."
Unlimited Supply Expansion, Continuous Demand Drain
If this incentive mechanism operates long-term, the market will fracture into two ends: Demand side: participating in meme coin speculation, statistically resulting in net losses over the long run, with only a tiny fraction of wallets securing substantial returns; Supply side: issuing tokens, earning profits with virtually no risk.
Becoming a supplier has almost zero threshold, requiring just one click to launch. Arbitrage tactics are already mature: quickly riding viral token heat, fabricating fake trading volume to create an illusion of activity, bulk-acquiring aged wallets for token creation, and this playbook iterates and optimizes monthly.
Thus, more and more participants who previously leaned toward holding tokens transform into token issuers. Issuing tokens is profitable, while holding tends toward loss. Every new participant who sees through this becomes another issuer, pooling to slice the shrinking buyer liquidity pie. This is the root cause of the HODL consensus collapse: not that traders are unwilling to hold long-term, but platform rules make long-term token holding the disadvantaged choice.
This trend is intuitively reflected in the quality of newly launched tokens: Pump.fun's current total token issuance nearly equals the peak levels seen at the end of 2024. In Q4 2024, 3.16 million launches produced 207 tokens with market caps exceeding $10 million; in Q3 2026, 3.05 million launches yielded only 24.
Chart: Pump.fun's token issuance volume has returned to late-2024 peak levels, but the number of tokens breaking $10M market cap monthly is just one-ninth of that period
Weekly new token issuance rebounds to over 300,000. The probability of an issuance yielding a breakout drops from 6.5 to 0.8 per 100,000 launches.
Some argue that trading volume within the bonding curve has risen continuously since June, which is true. However, the combined trading volume of the bonding curve and PumpSwap has shrunk from $25B-$30B monthly in Q1 2026 to $13.8B in October.
The platform profits by cutting trading volume fees; buyers' returns come from tokens becoming breakout hits. Yet today, the output scale of breakouts is only one-ninth of past years.
Token survival data further confirms this conclusion: among Pump.fun's cumulative 24.4 million issuance records, only 312 tokens maintain a market cap above $100k as of the statistical date. Approximately one out of every 78,000 tokens survives, yielding a survival rate of just 0.0013%.
Chart: Only 0.0013% of Pump.fun's issued tokens currently hold a market cap over $100k, roughly one in 78,000
Pump.fun's token survival rate falls below that of most similar platforms with significantly smaller issuance scales.
This is the first market we've observed where supply expands at high speed while demand simultaneously decays. Without the platform's incentive mechanism continuously nourishing this system, it could never have developed to its current scale.
Market Participants Also Fuel the Cycle
This system was built by Pump.fun, but the trading volume sustaining its operation comes from traders themselves. For the various arbitrage behaviors discussed to realize profits, counterparty fills are required. More often than not, that counterparty is us.
We denounce the chaos while simultaneously funneling traffic to it with our own actions: we criticize bundlers, only to watch and follow their next launch; some exploit viral tokens to harvest profits, prompting community posts praising their slick maneuvers; certain KOLs batch-shill twenty tokens daily, and audiences follow them solely for news priority, not because their followers can profit.
Of the fourteen tracked shillers mentioned earlier, only one enabled followers to profit, while the rest saw their followers lose a combined $926k in a single day.
We bear a dual cost for this: First, the trading volume we contribute yields fees extracted by Pump.fun and creators; second, our attention. Every subsequent hype cycle and shill harvest is essentially a battle for this same attention.
Long-Term Holding Is No Longer a Viable Strategy
A year ago, the mainstream approach was early discovery of potential tokens and HODLing through volatility. Today, the median price of pumped tokens drops 74% after one day. The survivors are those who sold first and exited. For individuals, front-running the sell-off is a rational choice, but when everyone does it, it eliminates any possibility for a token to develop a long-cycle bull run.
If no one holds tokens beyond the first hour after launch, a token can never grow to a multi-million dollar market cap, yet that exact first-hour window generates three-quarters of Pump.fun's revenue.
What Traders Can Change
We don't need to wait for Pump.fun's permission to adjust.
Hold tokens you genuinely believe in, rather than frequently swapping on minor price swings; judge shill KOLs by whether their followers profit, not by their posting frequency; stop spreading front-running and block-bundling as sophisticated trading strategies; redirect trading volume to alternative launch platforms—ones that incentivize long-term token survival rather than encouraging high-frequency turnover.
No single action listed above can directly fix the underlying incentives, but every transaction diverted away from this harvesting system reduces platform fee income.
Directions for Reconstructing Incentive Mechanisms
We are not smart contract engineers; the following are reform concepts, not ready-to-deploy engineering blueprints. The core of all ideas is shifting revenue distribution nodes from the first hour post-launch further down the timeline:
Increase initial token market cap, coupled with deeper initial liquidity; liquidity compounds alongside trading volume, ensuring continuous liquidity pool expansion;
Fees should be distributed not only to creators but also to token holders and liquidity providers; implement a vesting mechanism for creator fees, tying release schedules to token lifespan;
Shill incentives should no longer settle by trading volume, but shift favor towards holding behavior: KOLs earn bonuses based on whether followers still hold and remain profitable days later, rather than on transaction volume driven by the shill.
Only adjustments like these can sustain the vitality of the meme coin trading ecosystem, and Pump.fun itself possesses the capital reserves for trial and error: it holds approximately $2.84B in on-chain assets and fully controls the entire issuance pipeline. A market capable of continuously breeding long-cycle viral meme tokens will inevitably generate higher long-term value for the platform than a constant-buyer-extraction harvesting model.
The platform chooses short-term harvesting simply because it yields higher immediate profits, but this model is unsustainable.
Even if the above proposals are implemented, it might still fall short. Such reforms raise costs for suppliers (issuers, bundler arbitrageurs), but cannot change one reality: the tool advantages held by suppliers will always remain out of reach for demand-side participants.
Conceptualizing Issuance Models Beyond the Bonding Curve
All previous proposals remain built upon the bonding curve foundation. A further innovative step is to completely abandon the bonding curve issuance model:
In this new model, all participants' subscription prices are identical. Without a bonding curve, block-entry no longer holds a premium sniping advantage, rendering sniper bot attacks meaningless. Issuers set minimum and maximum raise targets; if the minimum raise isn't met within a fixed window (24 or 48 hours), the contract triggers a full automatic refund, with failed issuance causing zero loss to buyers.
Once the max raise is reached, the contract auto-generates a liquidity pool, LP tokens are burned or permanently locked, and raised funds become inaccessible to developers. Each wallet gets a subscription cap, e.g., max 1% of total raise, preventing whales or bots from absorbing the vast majority of chips.
The platform only charges fees upon successful raises; for thousands of failed issuances, the platform earns nothing. The platform's billing node shifts from per-transaction to per-successful-raise.
Chart: Comparison of current bonding curve mechanics vs. proposed fixed-price fundraising models regarding sniping advantages and platform billing nodes
This proposal eliminates bundler sniping, block-sniping, and developer rug pulls associated with the bonding curve model, while simultaneously removing the "launch dozens of tokens to bet on one viral hit" incentive.
But this model inherently has shortcomings that must be objectively noted: single-wallet limits offer limited defense against Sybil attacks. Current costs for bulk-buying aged wallets are low, meaning bundlers can still split funds across numerous Sybil wallets to bypass restrictions. Uniform subscription prices also cannot prevent dump-and-sell on launch day; it merely ensures fairness at the starting line.
Future Trajectory
The current meme coin narrative has reached its endpoint. We believe that unless the foundational issuance model undergoes radical innovation (similar to the aforementioned platform relying on successful raises for revenue, rather than trading volume and token zeroing), the meme coin category will struggle to restore its former ecosystem vitality.
As long as issuance platforms continue profiting from token zeroing and frequent turnover, this fertile ground for meme coin trading will lose its dynamism, and long-term holding will persistently remain the disadvantaged strategy. New formats will inevitably emerge, but they won't resemble the current iteration, and won't arrive anytime soon.