Written by: ABC Alpha researcher @cyrus_g3
The news that Pump.fun is preparing to raise $1 billion at a valuation of $4 billion has spread like wildfire. Interestingly, the community's attitude has become polarized.
The Solana establishment believes that Pump.fun is a cancer in the Solana ecosystem. The team is making a lot of Sol but keeps dumping the market. They don’t even do staking. They have no faith in Solana. At the end, they want to squeeze out the last bit of liquidity. They really eat it all up without leaving anything. In a word, they are greedy and don’t care about the lives of others.
The “never forget the well-digger” faction believes that Pump.fun has created a new paradigm for asset issuance, saving many retail investors from the endless suffering of the evil VC coins, giving retail investors the opportunity to make big money, and creating many A7, 8, 9, and 10. Pump,fun can be said to have done a great deed in saving people from suffering. The issuance of Pump.fun coins will not only not bring down Soana, but will bring the .fun paradigm to a higher level, making the issuance of assets on the Solana chain more prosperous.
Anyway, which of the two groups makes more sense?
ABC Alpha believes that both sides have told part of the truth. Pump.fun has indeed created a new asset issuance paradigm, allowing some people to get rich first, and it is indeed a great merit. However, the team has indeed been selling coins crazily. Do you think the valuation of 4 billion US dollars is high? It is indeed quite high at this stage, but if it was in October and November last year, let alone 4 billion, there would be people who would pay 10 billion. However, this year, especially in May and June, liquidity has indeed decreased a lot, and everyone is a little tired of P. There are too many Rugs and the wealth effect has decreased. The sudden opening of 4 billion US dollars, coupled with the fact that Sol is sold crazily, is indeed uncomfortable. It is hard not to suspect that the team is just going to reap the last harvest.
However, no matter what the Pump Fun team thinks, the market will give the answer whether everyone will buy it or not. However, the hidden issues behind this incident are more worthy of discussion:
If Pump.fun really raised $1 billion, and then the opening price of $4 billion was smashed to pieces, then can it still be played on the Solana chain? Is the .fun paradigm created by Pump really coming to an end? I think this question is worth thinking about.
Will the .fun paradigm fail and die out like previous asset issuance paradigms such as NFT and inscriptions?
My answer is, probably not.
From 2017 to 2024, there are essentially two asset issuance paradigms for Crypto: one is the VC-led VCM paradigm (Venture Capital Market), and the other is the community-led ICM paradigm (Internet Capital Market). Previously, ABC Alpha wrote an article describing what ICM is, the link is as follows: https://x.com/ABCAlphaDAOCN/status/1927673650419020089
VCM is easy to understand. It is a market dominated by risk institutions. The team raises money, develops products and businesses, and then issues coins to the market. This is the same as the traditional capital market. However, VCM is not a native asset issuance paradigm of Crypto. It is an imported product. The real native asset issuance paradigm of Crypto is ICM, which is asset issuance driven by community capital, and eventually forms a huge market around these assets.
Bitcoin is an ICM. Bitcoin has no VC investment. The initial community capital is everyone's investment in computing power mining. Bitcoin is an asset that grows up by relying on the issuance of the Internet community. Including Ethereum is actually an ICM. In the early days of Ethereum, there was no institutional investment (the $500,000 from Professor Xiao Feng can only be regarded as a donation at most). Then everyone used Bitcoin to participate in the Ethereum ICO, and then slowly built Ethereum. Including, many ICO projects in the Ethereum ecosystem in 2017, basically no VC investment, are all driven by community capital.
Which of the top Crypo OGs in the East and West is not a participant in the early ICM of Bitcoin or Ethereum? Therefore, ICM is the native asset issuance paradigm of Crypto.
Since 2018, especially after DeFi in 2020, the VCM paradigm has gradually gained the upper hand in the Crypto market, and eventually became a mainstream asset issuance paradigm in the Crypto market. A VCM project basically cannot be launched without raising $10 million. However, by 2023, especially in 2024, the VCM paradigm has gradually become problematic, and more and more retail investors are unwilling to pay for VCM tokens. VC coins have become something that everyone hates and no one cares about.
Why has the VCM paradigm been popular in traditional capital markets for so many years and has always been the mainstream, but is difficult to sustain in the Crypto field? What is the reason?
In fact, the reason is very simple, because in the traditional capital market, retail investors have no choice, and grassroots entrepreneurs have no choice.
Because, in the traditional capital market, the right to issue assets is monopolized by class. Only top resources and top entrepreneurial teams can obtain the right to issue assets (approved for listing by the China Securities Regulatory Commission), and capital naturally pursues these top targets. Weak retail investors can only become the last link in the traditional capital market. A large number of ordinary entrepreneurs cannot obtain the right to issue assets, and a large number of ordinary retail investors do not have the opportunity to participate in the early asset casting. Because once the right to issue assets is monopolized, ordinary people only have the last chance to take over.
However, in the field of Crypto, the right to issue assets is not monopolized by any center. It is open to everyone and is permissionless. Anyone can issue assets. Before in the traditional capital market, I had no choice. Now in Crypto, I also have the right to issue assets. I want to get back what I lost.
Someone will certainly ask, since Ethereum invented smart contracts, asset issuance has indeed become a right that everyone has, and asset issuance has indeed achieved thorough equality. However, ICO, NFT, and inscriptions are all community-driven permissionless asset issuance paradigms, and are also early prototypes of ICM, but why did they all die? Then, why is the .fun paradigm pioneered by pumu.fun sustainable?
That’s a good question!
For ICM to be successful and sustainable, at least two conditions must be met: first, the issuance of assets without permission, and second, an excellent venue for unlicensed liquidity. Both are indispensable.
Let’s take a look. Although ICO can issue assets without permission, the trading of ICO tokens does require permission. This is because there was no DEX at that time. After the ICO, if you need to go public on Huobi, Binance, or OKEx, you need to obtain approval from CEX.
Although NFTs and inscriptions do not require cumbersome review and approval from trading venues such as OpenSea and Unisat, NFTs and inscriptions are not good asset forms because of their poor liquidity, and it is easy for them to have a situation where there is a price but no market.
Therefore, although ICO, NFT, and inscriptions are also early prototypes of the ICM paradigm, they are unsustainable due to the limitations of the times and problems with the assets themselves.
However, the .fun paradigm pioneered by Pump.fun cleverly combines the unlicensed asset issuance and trading through the trench market + open market model, invisibly integrates the primary market and secondary market of asset issuance, and through the steep Bonding Curve, the price difference of asset issuance becomes the driving force for the community to spontaneously drive the distribution of tokens.
The most important thing is that Pump.fun has completely revitalized grassroots entrepreneurs and ordinary retail investors, which is the biggest source of market momentum.
Therefore, the .fun paradigm is a culmination of traditional ICM paradigms such as ICO, NFT, and inscriptions. In addition, at the end of 2023 and the beginning of 2024, after Crypto users experienced years of repeated abuse of VCM tokens, the accumulated indignation and funds with nowhere to go were all poured into pump.fun, which completely detonated the .fun paradigm.
At this time, some people said, however, the tokens on the .fun paradigm are mixed and there are more and more RUG disks, and the wealth effect is gradually decreasing. Is the .fun paradigm really sustainable? Will everyone go back to VCM tokens when they are tired of playing?
Earlier, I said that ICM is the native asset issuance paradigm of Crypto, but it does not mean that ICM has no market in Crypto. Some projects may continue to follow the VCM paradigm, but who says that VCM cannot be integrated into the ICM paradigm? (Here is an additional sentence. As of now, if Crypto does not have a new round of DeFi-like paradigm innovation, VCs will not continue to invest)
Most of the early projects on the .fun paradigm were pure memes, or ordinary early-stage startup projects that could not follow the VCM paradigm. However, as the market developed, high-quality ICM projects with excellent products and great teams began to emerge on the .fun paradigm. These projects were down-to-earth and focused on developing good products, and they could directly use ICM to complete asset issuance.
Not only that, even if some projects have received VC money, they can also follow the ICM paradigm. There are too many tools on the market that can help teams get the chips that belong to VC in the trench market. Then, the team and VC can unlock the tokens that belong to you according to the agreed rules. These are not noticeable to retail investors, because everyone in the trench stage grabs the chips fairly based on their own abilities. This does not change the rules and experience of ICM at all (in fact, many .fun paradigm tokens have always done this).
I know that some good projects that have received VC financing have started to operate in this way, so VCM can also be combined with the ICM paradigm. Therefore, in the future, whether it is pure meme, ordinary entrepreneurs, or excellent top projects, they can all follow the ICM paradigm. Then, has the ICM paradigm officially become the mainstream asset issuance paradigm of Crypto? So, will the ICM paradigm die out?
So, back to our title, will Pump.fun's token issuance really bring down Solana? Obviously not. Although it will temporarily drain some liquidity, the fundamentals of Solana and even the entire crypto have not changed. There is no evidence that without ICM, everyone will willingly return to VCM. Moreover, in the future, more and more new .fun-style asset issuance platforms will continue to emerge, and these will continue to carry forward the ICM paradigm.
Some people say that liquidity will eventually dry up. Yes, but that is a matter for the entire industry, not ICM. At that time, everything may have to start over again, and then wait for a new cycle to come.
Finally, as I said before, VCM is not a native asset issuance paradigm that truly conforms to the characteristics of Crypto, but ICM is.
