The Core Concept: A Two-Stage Launch
First, it's crucial to understand that a token on pump.fun has two distinct phases:
Bonding Curve Phase: The token is exclusively traded on pump.fun. The price increases with each buy according to a bonding curve.
AMM Phase: Once the token's market cap reaches $69,000, it is automatically launched and has liquidity provided on a decentralized exchange (like Raydium on Solana). The pool is created with 100% of the raised SOL.
The revenue distribution is different in each phase.
Phase 1: Revenue Distribution on the Bonding Curve
During this initial phase, when people are buying the token to push it toward the $69k goal, the revenue is split between two main parties.
Let's say you buy a brand new token for 1 SOL. Here is where that 1 SOL goes:
| Recipient | Share of Revenue | Purpose / Explanation |
|---|---|---|
| Token Creators (The Team) | ~78.5% (0.785 SOL) | This is the primary incentive for creators. They get the majority of the funds raised during the bonding curve to fund their project or take profit. |
| pump.fun Treasury | ~1% (0.01 SOL) | This is the platform fee. It's how pump.fun makes money. This fee is notably very low compared to other launchpads. |
| Token Liquidity Pool | ~20.5% (0.205 SOL) | This is the most critical part. This portion of the SOL is reserved to provide liquidity when the token launches on Raydium. It is locked and goes directly to the AMM pool in Phase 2. |
In short, during the bonding curve:
Creators get ~78.5% of the buy-in SOL immediately.
~20.5% is set aside for the future liquidity pool.
pump.fun takes a 1% fee.
Phase 2: Revenue Distribution After Raydium Launch
Once the token hits $69,000 Market Cap, two things happen automatically:
All the SOL that was reserved for liquidity (~20.5% of all buys) is used.
An equal value of the token (from the "team" portion held by the contract) is added.
This creates a 50/50 liquidity pool on Raydium (or another DEX).
Now, the token is trading on an open market. The revenue distribution changes:
pump.fun Platform Fee: A 1% fee is still applied to every trade (both buys and sells) on the Raydium pool. This fee is taken in the token being traded and is sent to the pump.fun treasury.
Creator Royalties: The original creators do not automatically get a fee from every trade after the Raydium launch. Their revenue was front-loaded during the bonding curve phase (the 78.5%).
LP Provider Fees: The liquidity pool earns a fee (typically 0.3-0.25% on Raydium) from all trades, which goes to the people who provide liquidity after the initial launch.
What About Sells?
The sell mechanics are also crucial to understand:
Selling during Bonding Curve Phase: If you sell your token before it reaches Raydium, you sell it back to the bonding curve. The price you get is lower than the current buy price (there is a spread). The SOL used to buy back your tokens comes from new buyers entering the pool.
Selling after Raydium Launch: You sell directly on the open market (e.g., Raydium). The 1% pump.fun fee is applied, and you get the current market price from the liquidity pool.
Summary Table
| Action | Creator Gets | Liquidity Pool Gets | pump.fun Gets |
|---|---|---|---|
| Buy (Bonding Curve) | ~78.5% of the SOL | ~20.5% of the SOL (locked for launch) | 1% of the SOL |
| Sell (Bonding Curve) | N/A | N/A | The sell happens against the bonding curve; the price impact is absorbed by the curve mechanics. |
| Trade on Raydium | 0% (unless they set up royalties separately) | ~0.25% (Standard DEX LP fee) | 1% (on every buy and sell) |
Key Takeaways
Creators are heavily incentivized to promote their token to reach the $69k goal, as they receive the vast majority (78.5%) of the funds raised during that phase.
The launch is automated and "rug-pull proof" in a specific sense: the liquidity for the Raydium pool is locked and guaranteed from the buy-in SOL. A creator cannot withdraw the 20.5% that is reserved for liquidity.
pump.fun's business model is the consistent 1% fee on all transactions, both on their platform and on the subsequent Raydium pools, which becomes very significant with high volume.
The "team" or creator allocation is not a fixed percentage of the token supply as in a traditional ICO. Instead, it's a direct share of the revenue during the initial raise.
