Why FTO Model Is More Advanced Than pump.fun’s Bonding Curve On Berachain

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As a seasoned analyst with over two decades of experience in the ever-evolving blockchain industry, I’ve witnessed the rise and fall of countless projects, trends, and fads. The recent surge of decentralized finance (DeFi) has undoubtedly been one of the most intriguing developments, and the meme token craze spearheaded by projects like pump.fun is no exception.

The burgeoning trend of Decentralized Finance (DeFi) has ignited a flurry of fresh initiatives, fueled by economies based on tokens. With DeFi’s ongoing expansion, we’re seeing more and more projects issuing their own tokens to tap into the rapidly growing market.

Currently, there’s a lot of buzz about the launch of meme tokens, particularly due to the unique bonding curve model pioneered by pump.fun. This innovative approach has contributed significantly to the meme token market’s current valuation of $500 million. Following the initial triumph of pump.fun, various adaptations have sprung up on different blockchains, such as pump.best from base and Kodiak Finance from berachain.

As a researcher exploring the world of blockchain technology, let me share some insights about Berachain, a high-performing EVM-compatible chain that operates on a unique consensus mechanism called Proof-of-Liquidity. This innovative consensus model fosters a harmonious partnership between validators, ecosystem projects, and everyday users, creating a robust network dynamic.

How Does Bonding Curve Work on Pump.fun?

The bonding curve is a launch mechanism brought by pump.fun and recently went really hot in Solana ecosystem. Since it launched,Over 2 million tokens being launched and generated over 105 million revenue. Why it goes so hot.

Let’s illustrate the growth of a token’s worth as its availability expands using a chart. Interestingly, this mathematical relationship holds true only for tokens with a restricted or predetermined supply.

Why FTO Model Is More Advanced Than pump.fun’s Bonding Curve On Berachain

In this model, early investors benefit the most from such a launch mechanism. 

Below is more break down of pump.fun model

After a token gets listed on Pump.fun for sale, its main goal is to distribute those tokens. This is how the procedure unfolds following the transaction:

    Once the target of selling all 800 million tokens is met, the bonding curve reaches full capacity and automatically transitions to Radium.
    The transition to Radium requires approximately 86 SOLs, with the number fluctuating between 84 and 86
    The term “King of the Hill” is used to refer to the sale of 400 million tokens, i.e. half of the target. Approximately 45 SOLs are required for the “King of the Hill” status.
    There’s also a threshold in terms of market cap. It is $69,000 for Solana and $420,000 for Blast.

When a token’s market capitalization surpasses specific levels (Solana at $69,000 and Blast at $420,000), Pump.fun adds liquidity (12,000 dollars for Solana and 30,000 dollars for Blast) into decentralized trading platforms like Raydium and Thruster DEX.

Essentially, the bonding curve model at Pump.fun strikes a balance between ensuring a fair launch and generating excitement associated with FOMO (Fear Of Missing Out). Some early adopters have earned significant returns, up to 100 times their initial investment, while many regular users have faced losses in this process.

FTO: The Anti-Rug Pull Launch Mechanism Within Berachain

The Fair Token Offering (FTO) is a tool developed by Honeypot Finance for new projects to distribute their own tokens. After an update from Honeypot Finance, this system can now be adjusted to successfully release meme tokens on BeraChain as well. Here’s the original design we were introduced to by the team.

  • FTO involves the creation of a 100% deep liquidity pool for instant trading. While this enables trading from day 1, there are no pre-minted tokens in the market. It rules out pump or dump by early investors since there’s nothing like early access to the token.
  • While the team behind the project can sell the LP tokens for further development, this does not lead to a shark slump in the token’s price. The maximum loss from users is only 50% compared to a lot of launch model (even bonding curve) could lead to over 90% loss
  • Both users and project will become the Liquidity providers after launch and are eligible for a share of transaction fees in accordance with their contribution. Besides, they also earn $BGT emissions from berachain’s Proof of liquidity, unlocking access to further monetization opportunities through the Flywheel Model.

Honeypot Finance’s FTO vs Pump.fun’s Bonding Curve

The primary difference between the FTO (Fair Token Offering) and Bonding Curve models lies in liquidity sourcing. While both methods aim to foster long-term engagement and efficient pricing, the Bonding Curve model fails to mitigate risks such as potential loss of funds and a lack of sustained user interest. FTO, on the other hand, excels in prioritizing liquidity by enabling community members to become liquidity providers. In contrast, the Bonding Curve model relies solely on the token deployer for liquidity, which creates an imbalance, potentially leading to manipulative practices like pump-and-dump schemes or rug pulls.

On Berachain, the FTO model seamlessly integrates with the Proof of Liquidity (POL) system, enabling users to function as liquidity providers even after launch, and receiving $BGT incentives for their pool contributions. This results in a stronger and more user-friendly option on Berachain.

In the Pump.fun system, one significant drawback is that the creator who successfully mints a popular meme token doesn’t receive rewards for their efforts. However, Honeypot Finance’s meme launchpad is still under development, and it holds promise for fairly compensating token creators. It will be intriguing to observe how this model could boost Berachain’s Proof of Liquidity and spur further advancements in the meme token sector.

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2024-09-06 16:28