pump.fun, the bonding curve and graduation

Wonder

1. How can a token trade continuously without anyone depositing capital into a pool?
2. Why does the price of a pump.fun token rise automatically with every buy?
3. What happens to the remaining supply when the bonding curve completes?

Explore

Part Ipump.fun and the bonding curve

1. pump.fun launched on Solana in January 2024, reducing token creation to a single interface action. On Ethereum, launching an ERC-20 required writing or deploying smart contract code and seeding liquidity with personal capital. pump.fun abstracts this entirely: the platform deploys the contract, sets a fixed supply of one billion tokens, and initiates trading instantly. The barrier to entry dropped from hours of technical setup to seconds of interaction.
2. The core mechanism is a bonding curve based on constant-product virtual reserves. Unlike traditional AMMs where liquidity providers deposit assets into a pool, pump.fun uses an algorithm that acts as the counterparty. Virtual SOL and token reserves define the initial price. As buyers purchase tokens, the virtual SOL reserve increases while the token reserve decreases, mechanically raising the price. Sellers reverse this process. This ensures a continuous quote without external liquidity provision.
3. Roughly eighty percent of the total supply is sold along this curve, and the platform takes a fee on every trade. When the curve reaches its predefined completion point, the token ‘graduates.’ At graduation, the accumulated SOL and the remaining tokens are deposited into an automated market maker pool (on Raydium at first; on pump.fun’s own PumpSwap since March 2025), and the token trades against real reserves from then on (next lesson).
4. The activity generated by pump.fun is substantial, producing millions of tokens in its first year and enormous trading volume. However, only a small fraction of these tokens successfully graduate to AMM pools. Most lose nearly all their value before reaching that threshold. With creation nearly free, attention rather than any use decides which tokens trade at all.
5. Controversies have emerged alongside the growth. In November 2024, pump.fun suspended its livestreaming feature after reports of harmful content associated with token promotions. Legal actions have also been initiated against the platform and related entities. Both show how unsettled the rules are for a platform that lets anyone issue a tradable token in seconds.
6. To verify these mechanics, open a Solana block explorer and locate any active pump.fun token. Find the token’s bonding-curve account and watch its reserves change as trades arrive, and note how each buy or sell moves the price. Then, find a token that has recently graduated and inspect its migration to an AMM pool. Compare the liquidity depth of the new pool against the volume traded on the bonding curve prior to graduation.

Part IIGraduation and AMM migration

7. A pump.fun token begins life on a bonding curve, where price is determined by a fixed mathematical relationship between virtual reserves. Trading occurs entirely within this closed system until a specific condition is met: the complete sale of the real token reserves held in the program. This event is not arbitrary; it is a hard mechanical trigger that signals the token has reached its initial market cap threshold defined by the curve’s parameters.
8. Shortly after completion, a migration instruction, which anyone can call, runs. The accumulated SOL raised during curve trading and the remaining unsold tokens are deposited into an automated market maker (AMM) pool. Simultaneously, the liquidity provider (LP) tokens generated by this deposit are burned. This burn is critical: it removes the ability for any single entity, including the original creator, to withdraw the underlying assets from the pool unilaterally.
9. From January 2024 through March 2025, these graduated pools were created on Raydium, Solana’s primary DEX. In March 2025, pump.fun migrated this function to its own AMM, PumpSwap. The pool design stayed the same: a constant-product pool (x · y = k) was initialized with the raised capital and token supply. Post-graduation, the token trades like any other Solana pair, subject to standard slippage and price impact determined by the pool’s depth.
10. The burned LP tokens eliminate the ‘rug pull’ of liquidity withdrawal, where the creator withdraws the pool’s SOL and leaves buyers holding tokens no one can buy from them. However, this protection is narrow. It does not prevent insiders who hold large amounts of the token from selling into the new pool, nor does it stop snipers—bots that execute trades in the same block as graduation—from buying at low prices before the market adjusts. The liquidity is secure, but the supply is not.
11. Graduation moments are highly volatile and attract significant bot activity. Because the transition involves a sudden change in trading mechanics from a curve to an open pool, price discovery becomes chaotic. Bots compete to trade in the first blocks after the pool opens, and holders from the curve who want to take profits sell into the same moment, so prices can swing sharply within seconds.
12. To verify this process, open a Solana explorer such as Solscan or the native Solana Explorer. Search for any token that graduated from pump.fun in March 2025 or later. Locate the transaction where the pool was created on PumpSwap. Within that transaction’s details, find the instruction that burns the LP tokens. This burn event is the on-chain proof that the liquidity has been locked and cannot be removed by a single party.

Key facts

Exercise nine, six, three, one

Fact check

Dates, figures and claims checked against the published sources listed below.

• pump.fun documentation and FAQ
• Dune Analytics dashboards on Solana memecoin volume (2024)
• Contemporary reporting on pump.fun controversies (November 2024)
• pump.fun documentation: Graduation and Migration
• PumpSwap Announcement (March 2025)
• Raydium Documentation: Pool Creation
• Solana Program Library: SPL Token Standard